Ahhh Friday – the perfect day for a random assortment of insights.
The violent storms that hit the Southeast and East this past week point up the need for advisers (and compliance tech companies!) to have comprehensive disaster recovery plans (DRP). Draft a DRP if you don’t already have one. Update your DRP if you do. Test your DRP at least annually. Take a page out of the Boy Scouts and be prepared.
In addition to adding about 100 new examiners, the SEC is shifting examiners from broker dealer to investment adviser examinations. One wonders how an examiner steeped in the rules-based world of broker-dealers will adjust to the best practices world of investment advisers. Try and find a specific rule that addresses best practices, social media; directed brokerage; business continuity; business succession; client complaints; risk assessment; supervision; suitability; valuation; allocation of investment opportunities; trade aggregation and allocation; or trade errors. Hence the concern that this group of transfers from broker-dealer examiners will not understand the nuances of investment adviser compliance.
Can there actually be “robo-compliance” for investment advisers? We don’t see how . . . . at least not yet. That’s why we came up with the name CCO Companion for our compliance app. It is not meant to replace your chief compliance officer, but rather, be their primary compliance resource. And how great is it for some chief compliance officer that is only in the position by virtue of their ownership of the firm to be able to pull out their copy of CCO Companion when the SEC examiner asks them “how do you stay current with your regulatory obligations?”