The Ultimate RIA Compliance Checklist

The Ultimate RIA Compliance Checklist: Your Guide to Ongoing Compliance for Registered Investment Advisers

Staying compliant with SEC and state regulations is crucial for registered investment advisers (RIAs). This comprehensive RIA compliance checklist covers key compliance tasks, issues, requirements and best practices to help your advisory firm avoid violations.

Compliance is complex, but essential. Failing to meet compliance rules under the Investment Advisers Act of 1940 can lead to significant fines, enforcement actions, and even loss of registration. A strong compliance program demonstrates your commitment to fiduciary duty and provides a framework for delivering advice in your clients’ best interests.

This compliance checklist provides actionable steps to fulfill your regulatory responsibilities and meet compliance standards enforced by the SEC, state securities regulators, and self-regulatory organizations (SROs). Let’s review key compliance activities RIAs must perform regularly.

What Are the Main RIA Compliance Requirements?

RIAs have ongoing compliance obligations related to:

  • Registration, disclosure and recordkeeping
  • Written policies and procedures
  • Code of ethics and conflicts of interest
  • Custody of client assets
  • Suitability of investment advice
  • Best execution of client transactions
  • Marketing and performance advertising

Fulfilling these requirements involves numerous compliance tasks. How can RIAs stay on top of everything? This RIA compliance checklist serves as a roadmap for managing compliance efficiently.

Why Is a Compliance Checklist Important for Advisory Firms?

Implementing an RIA compliance checklist helps:

  • Ensure consistency in meeting compliance standards
  • Document fulfillment of compliance requirements
  • Identify gaps upfront to avoid deficiencies
  • Train staff on compliance policies and procedures
  • Prepare firms for SEC examinations

Establishing compliance checklists and calendars tailored to your RIA’s business model is a best practice for compliance programs. Checklists give Chief Compliance Officers (CCOs) and staff a clear plan of action for completing compliance reviews, reports, filings and tasks on schedule.

Let’s walk through key RIA compliance checklist items.

RIA Compliance Checklist

Registration, Disclosure and Reporting

  • Annually update Form ADV Parts 1 and 2
  • Deliver Form ADV Part 2 to new clients when they onboard
  • File Form ADV amendments within 30 days of material changes
  • Submit annual Form ADV amendment within 90 days of fiscal year end
  • Pay IARD system filing fees for Form ADV amendments
  • Submit Form PF quarterly if required
  • File state registration amendments when required

Written Policies, Procedures and Controls

  • Annually review all firm policies and procedures
  • Update policies and procedures to reflect business/regulatory changes
  • Review and test internal controls for adequacy
  • Provide employees with training on new policies and procedures

Code of Ethics and Personal Trading

  • Annually provide employees with copy of Code of Ethics
  • Collect employee acknowledgments of Code of Ethics
  • Require employees to report personal securities accounts and transactions
  • Review employee trading reports and pre-clear personal trades
  • Identify conflicts of interest related to employee personal trading

Custody and Account Statements

  • Engage a qualified custodian to hold client assets
  • Have written agreement with the custodian
  • Ensure clients receive account statements directly from custodian
  • Disclose any account statements sent directly to clients

Suitability and Fiduciary Duty

  • Document suitability analysis for investment recommendations
  • Provide clients with periodic portfolio reviews and updates
  • Disclose fees, compensation and conflicts of interest
  • Treat clients fairly and act in their best interest

Best Execution

  • Annually review brokerage arrangements and commissions paid
  • Seek to obtain best price and execution for client transactions
  • Disclose soft dollar arrangements if applicable

Marketing and Performance Advertising

  • Verify marketing materials are fair, accurate and not misleading
  • Review performance results to confirm calculations methodology
  • Provide proper disclaimers and explanations for performance data

Books and Records

  • Maintain accurate financial and accounting records
  • Keep all digital and physical records for required time periods
  • Securely store all sensitive client information

The Future of RIA Compliance: The Role of Compliance Technology

As we gaze into the future of RIA compliance, technology emerges as a dominant player. Harnessing the power of compliance technology, RIAs can automate the mundane, ensuring efficiency and minimizing human errors. Beyond just automation, these tech solutions offer vigilant monitoring, timely reminders for looming compliance deadlines, and detailed reports, aiding in the constant refinement of compliance strategies. Consulting with advisors, such as My RIA Lawyer in Atlanta, can further illuminate the path, ensuring that RIAs remain at the forefront of compliance in an evolving digital age.

Frequently Asked Questions:

Q: What are some of the key terms associated with RIA compliance?

A: Some key terms associated with RIA compliance include “SEC,” “annual compliance,” “disclosure,” “compliance calendar,” “investment advisory,” “ongoing compliance,” “SEC and state,” and “compliant.”

Q: What is the role of the SEC in RIA compliance?

A: The Securities and Exchange Commission (SEC) is the regulatory body responsible for overseeing the compliance of RIA firms that have more than $100 million in assets under management.

Q: What are some of the compliance tasks that an RIA firm must perform?

A: An RIA firm must perform various compliance tasks, including implementing and maintaining business continuity plans, conducting periodic compliance reviews, managing conflicts of interest, and ensuring compliance with advertising and marketing rules.

Q: Can an RIA firm outsource its compliance tasks?

A: Yes, an RIA firm may choose to outsource some of its compliance tasks to compliance consultants or technology solutions providers. However, ultimate responsibility for compliance still rests with the firm.

Q: Why is compliance training important for an RIA firm?

A: Compliance training is important for an RIA firm to ensure that its employees understand the firm’s compliance policies and procedures and the regulatory requirements they must adhere to in providing investment advice to clients.

Conclusion – Top Compliance Takeaways for RIAs

Staying compliant is an ongoing process for RIAs. Key takeaways include:

Written policies and procedures form the backbone of an RIA’s compliance program

Regular review ensures policies and procedures are updated

A skilled CCO manages day-to-day compliance

Ongoing training keeps personnel informed

Annual compliance reviews analyze program effectiveness

Regular monitoring supplements the annual review

A compliance calendar tracks critical filing and task deadlines

By following this RIA compliance checklist, your firm can maintain its SEC Registered Investment Advisor status and operate legally and ethically. Regularly reviewing and updating your compliance program, as well as staying informed about regulatory changes, will help ensure ongoing compliance and protect your firm from potential penalties and reputational damage.