In its biennial report on examinations of state-registered investment advisers, the North American Securities Administrators Association ("NASAA") reported that most investment advisers lack policies and procedures regarding the financial exploitation of seniors or other vulnerable investors.

In 2021 report on state securities examinations deficiencies, NASAA highlighted compliance deficiencies related to (i) registration, (ii) books and records, (iii) contracts, (iv) supervision and compliance and (v) advertising, among others. NASAA stated that 59 percent of state-registered investment advisers had no policies or procedures for suspected financial exploitation.

NASAA also highlighted that cybersecurity-related deficiencies significantly decreased from the previous administration of the examinations in 2019.

Based on the results of its 2021 examinations, NASAA recommended the following best practices:

  • annually assess and update Form ADV and disclosure brochures;
  • examine and update all contracts;
  • back up and safeguard electronic data and records;
  • keep due diligence files on recommendations to investors;
  • include business continuity plans and information security procedures in written compliance and supervisory manuals;
  • prepare and distribute a privacy policy;
  • review all advertisements, including websites and social media, for accuracy;
  • establish custody safeguards, particularly as to direct fee deductions; and
  • implement personnel training procedures with respect to senior and other vulnerable investors.

Primary Sources

  1. NASAA Press Release: State Investment Adviser Examinations Sweeps Uncover Deficiencies in Policies To Protect Seniors And Vulnerable Persons

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