The Problem with Buying Off-the-Shelf: It May Not Fit!

The Fort Worth, Texas, Regional Office (“FWRO”) of the SEC recently named the failure to sufficiently tailor off-the-shelf compliance programs as one of its most cited deficiencies during regulatory exams in 2017. According to the FWRO, such deficiencies were present in nearly half of all examinations conducted by them.

The news came during a first-of-its-kind call directly between the FWRO and over 2,000 industry members. The call consisted of a discussion of the exam program, investor risk highlights and a question-and-answer session. Although 11 deficiencies were mentioned during the exam priorities section, much of the call focused on the need to address individual-based risks through a well-designed compliance program.

The FWRO noted findings that many firms used “canned” compliance programs that were not tailored to the adviser’s business, and in some extreme cases the policies even included the names of other advisers. Those advisers that participated on the call were also reminded that the Compliance Rule requires issues from the previous year to be catalogued in an annual review and addressed in a timely manner. Finally, the FWRO stated that it was “no fan” of chief compliance officers with too many other roles.

So, what does this mean for investment advisers? A couple of things, but most importantly the need to ensure your policies are customized based on your business, affiliations, conflicts of interest and protocols.

Make sure that your compliance program receives sufficient attention and is sufficiently tailored. A good first step could be using Ascendant’s Risk Matrix Tool, housed on the  Ascendant Compliance Manager, to inventory the risks posed to your specific business model and determine if your policies adequately address those risks. You should also review your previous annual reviews to ensure that the issues identified in them have been remediated. From there, you should establish whether or not your policies and procedures are reasonably designed to effectively confront these risks.


For more information, or for a demo of Ascendant’s Risk Matrix Tool, please contact us at info@ascendantcompliance.com or call us at 860-435-2255.

Related Content

Latest Content

The Challenges of Building a Global Compliance Program

Compliance programs face challenges in balancing global requirements with local exceptions while incorporating the fast pace of regulatory change, addressing critical business needs and obtaining the necessary resources necessary to manage the program. Trends and thinking on the subject were center stage at the recent CSS London event “Looking at the Year Ahead – Global … Continued

Coming to America – California Adopts GDPR-Like Privacy Regulation

After a number of firms struggled last year to get their marketing and information systems into compliance with the EU’s General Data Protection Regulation (GDPR), advisers to U.S. clients will soon be facing similar requirements on the home front.  On the heels of the Cambridge Analytica scandal, California enacted the California Consumer Privacy Act of … Continued

SEC and FINRA 2019 Examination Priorities

The SEC and FINRA have recently released their examination priorities for 2019. These releases provide insight into regulatory priorities and serve as guidance for a firm in evaluating its compliance program. We will discuss topics covered in these releases, including: Protecting retail investors Fees and expenses Disclosure Conflicts of interest Suitability Protecting senior investors Trading … Continued

SEC Reopened After 35-Day Government Shutdown

SEC Chairman Jay Clayton announced on Saturday, January 26 that with an agreement reached to end the government shutdown, the “Commission has resumed normal staffing levels and is returning to normal operations.” In total, about 94% of the commission’s approximately 4,400 employees had been furloughed during the 35-day shutdown, according to its operations plan. In a … Continued

FINRA Rolls Out New Central Registration Depository Functionality; Annual Verification Deadline Nears

FINRA first introduced enhancements to the Central Registration Depository (“CRD”) on October 1, 2018, which were rolled out in support of FINRA’s restructured qualification examination program as well as the adoption of consolidated FINRA registration rules. The new enhancements were intended to also more easily assist member firms with satisfying their reporting and compliance obligations. … Continued

Mailing List

Subscribe to the Ascendant Compliance email list for the latest compliance resources, conferences, ComplianceCasts™, and more.

Loading form...

Contact Us

Ascendant works together with clients to identify and assess critical needs through customized plans. If you need assistance with compliance functions, regulatory services, cybersecurity or technology tools, we’d love to speak with you.