Investment advisers need to comply with various regulations and standards to properly serve clients and uphold market integrity. This includes following codes of ethics, properly disclosing conflicts of interest, adhering to know-your-customer and suitability requirements, safeguarding client information, and maintaining independence and objectivity. Some key aspects of compliance include registration, audits, policies and procedures, continuing education, and recordkeeping. Having strong compliance helps build public trust in the investment industry. This article will explore key compliance issues for investment advisers and provide guidance on establishing a culture of integrity.
Following codes of ethics and standards of conduct
Investment advisers must follow codes of ethics like the CFA Institute Code of Ethics to ensure fair dealing, integrity, honesty, and putting clients’ interests first. This means properly disclosing fees, avoiding conflicts of interest, not misrepresenting credentials, and maintaining confidentiality. Advisers should also adhere to standards of conduct that govern duties to clients, employers, and the market. This helps advisers make ethical decisions.
Registration, licensing, and qualifications
Depending on the jurisdiction, investment advisers may need to register with regulators to legally conduct business. This requires passing qualifying exams, submitting registration forms and fees, and meeting capital requirements. Advisers must keep their registration current through timely filings and renewals. Obtaining proper licensing and qualifications signals an adviser has attained a certain level of competence.
Establishing policies, procedures, and controls
Advisers should implement robust policies, procedures, and controls governing their investment processes. This includes setting criteria for approving securities, documenting investment committee decisions, enforcing trade allocation policies, and ensuring best execution. Advisers must also have protocols for compliance breaches, complaints handling, and conflicts of interest.
Performing audits and regulatory reviews
To check for compliance gaps, advisers should perform periodic audits and regulatory reviews. This can reveal deficiencies in compliance manuals, disclosure documents, account opening procedures, investment guidelines monitoring, or employee personal trading. External audits provide an objective assessment. Examinations by regulators like SEC can also assess compliance programs.
Ongoing education, training, and supervision
Through regular training and education, advisers can update their knowledge on regulations and better comply with codes of ethics. Advisers should be trained on policies and technical compliance issues. Supervisors need to ensure they properly oversee personnel for adherence to regulations and ethical codes.
Following regulations and upholding ethical standards are crucial for investment advisers to maintain trust and properly serve clients. Robust compliance requires codes of ethics, proper disclosures, qualifications, policies, audits, training, and supervision. Advisers must make compliance a top priority.