RIA Compliance and Practice Management Blog

How an RIA Firm Can Create a Culture of Compliance

Posted by RIA in a Box

Jul 5, 2016 6:27:39 PM

Regulatory Examiners Focused on RIA Culture of Compliance during Audits

The Chief Compliance Officer (CCO) of every registered investment adviser (RIA) needs to be focused on developing the proper culture of compliance.  An effective compliance program starts from the top with consistent firm wide communication and the firm's key principals setting the proper example by making it clear that firm takes its compliance responsibilities seriously.

This culture needs to be reinforced on a daily basis, but the firm's annual compliance meeting with all staff members is also a ripe opportunity to set expectations and more formally establish the proper compliance culture. The annual compliance meeting provides the opportunity for the CCO to conduct necessary training for supervised staff, communicate updates to the firm’s written policies and procedures, answer questions, and to review relevant regulatory changes.

When a regulatory examiner first arrives to perform an audit, one of the first goals of the examiner is try and gauge how seriously a firm takes its regulatory responsibilities. First impressions make a big difference during an audit and there are many steps to take when developing a culture of compliance at an RIA firm such as:

    • Develop and implement a supervisory policies and procedures manual and a code of ethics that is communicated and understood by all staff members.
    • Provide initial and ongoing training for all staff members including having a portion of the new employee onboarding process dedicated to compliance.
    • Have staff members attest to having reviewed the firm’s unique policies and procedures, code of ethics, and any other appropriate documents.
    • Establish employee communication procedures such as how to communicate when there are relevant regulatory changes, there is a pending regulatory exam, or deficiencies are found during an exam.

The examples listed above are far from an exhaustive list of steps a firm needs to take. However, as RIA compliance consultants, we also want to stress the importance of establishing a true culture of compliance rather than simply going through the motions. Investment advisory firm principals need to be focused on compliance not just because of various regulatory requirements, but rather since it allows the firm to better serve clients by creating checks and balances through proper systemization. 

It's also important to note that while hiring a qualified CCO or personally spending more time on compliance may be a good first step in addressing the firm's regulatory responsibilities, that act alone is not enough. As recently discussed by Securities and Exchange Commission (SEC) staff during their national compliance outreach seminar, proper compliance is not only the CCO's responsibility, but rather the proper compliance culture must be adopted across the entire firm.

Be sure download our free checklist on how an RIA firm can begin to create a culture of compliance by clicking on the link below: 

How an RIA Firm Can Create a Culture of Compliance Checklist


Topics: RIA Operations, RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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