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.

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