Don’t Just Wait!

So you got your Form ADV filed with the SEC and you are waiting for March 31. Don’t just wait. As I wrote back in December registration is just the beginning of the journey. Now is the time to find the kinks in your compliance and supervisory programs.

Over the next month you should systematically go through your policies and procedures and make sure that they comply with Rule 206(4)-7. Are they reasonably designed to prevent violations of the rules and regulations? Areas of particular importance:

  • ·         Books and records
  • ·         Personal trading policies
  • ·         Codes of ethics
  • ·         Procedures on valuation
  • ·         Documentation of supervisory reviews
  • ·         Maintenance of emails

If your policies and procedures say that you take certain steps then make sure to document each step. This review should also cover your technology. Is the information collected and then saved in compliance with the Advisers Act? Can you go back and recreate the value of your portfolio for everyday of the month? Are all emails saved even if a user can delete them from their inbox? These are the type of issues that the SEC (and state regulators) will focus on with they come to do an exam.

And by the way do not assume that you will not see the SEC or your state regulator during your first year of registration. While I doubt that every registered adviser will be examined, the SEC will be looking to set examples and you do not want to be an example.

Does this mean that you should spend the next month in a panic? Absolutely not. But you should spend it methodically reviewing and adjusting your plan.

(c) Copyrighted by Sharon M. Davison, you may use with attribution.

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