Most Popular ArticlesJuly 21, 2009
To address anti-money-laundering regulations, an automated system should perform a review against regulatory watch lists, document that review, and provide an automated review of Financial Action Task Force (FATF) on Money Laundering jurisdictions. A compliance system can allow an advisor to do a client check prior to subscription, and upon and after as well. For firms that engage in soft-dollar activities with their brokers, compliance technology can also document a review of soft-dollar services against disclosure to clients, demonstrating a commitment to transparency and full disclosure.
Under rule 206(4)-7 of the Investment Advisers Act of 1940, RIAs are required to undertake an annual review of compliance procedures. In a busy RIA firm, making time for an annual review can be challenging. To make the review as painless as possible, technology should automate a review of major compliance areas. This can involve reviewing reporting violations for particular employees, reviewing service provider procedures, and generating updates on the CCO’s efforts to stay current with new regulatory rules.
Automated systems should also play a role in tracking and monitoring communication with clients and prospects, providing RIAs with a simple way to stay compliant with the Advisers Act record-keeping rule. E-mail retention software can provide the firm with a means for archiving, reviewing and backing up crucial communications with clients and prospective clients. During an SEC audit, examiners will almost definitely ask to review certain emails. Using email retention software allows a firm to periodically review random emails looking for the same key terms that regulators may look for (such as “guaranteed returns”).
Giving your business an edge
Automation is the only way to handle compliance comprehensively and cost-effectively. The workflow support it creates will not only remind your CCO when it’s time to address compliance requirements, it will also produce the reports and filings required, quickly and routinely.
From a human resources perspective, it makes more sense to put the heavy lifting on a computer system, allowing the CCO to concentrate on providing the leadership and planning necessary to maintain a compliant organization. For example, the CCO will have more time to think through and manage other high-level compliance risk areas of the firm, such as risk assessments, conflict of interest reviews, review of adequate and consistent disclosures and training.
Compliance is part of the cost of doing business, and doing it well gives your firm an advantage in the marketplace. Creating a streamlined system for compliance demonstrates that assets placed in your care are being handled prudently and that your business activities are managed responsibly. Today’s clients are suspicious and wary. Firms that build a culture of compliance will have an edge attracting new assets.
* William G. Mulligan is Chairman and CEO of HedgeOp (www.hedgeop.com), a provider of specialized compliance software and consulting services for asset managers.
Display article as PDF for printing.
Would you like to send this article to a friend?
Remember, if you have a question or comment, send it to .
