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