The Office of Compliance Inspections and Examinations ("OCIE") observed compliance deficiencies for investment advisers with branch offices and geographically dispersed operations.

In a Risk Alert, OCIE highlighted implementation issues related to IAA Rule 206(4)-7 ("Compliance Procedures and Practices") (the "Compliance Rule"). OCIE identified deficiencies related to:

  • policies to limit a supervised person's ability to process client withdrawals, deposits or changes of address;
  • disclosure of fees and other material information in advertisements and client communications; and
  • portfolio management, including the oversight of investment recommendations and trade allocations.

OCIE also observed the following practices that improved compliance:

  • consistent and uniform oversight policies and procedures across branch offices as to (i) the approval of advertisements, (ii) client fee billing and (iii) trading activities;
  • periodic (at least yearly) compliance testing or reviews at branch offices;
  • policies for examining the disciplinary history of a supervised person during the hiring process; and
  • required compliance training, for the employees of a branch office, that is specific to the branch's areas for improvement.

Primary Sources

  1. OCIE Risk Alert: Observations from OCIE's Examinations of Investment Advisers - Supervision, Compliance and Multiple Branch Offices

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