In 2020, we published over 100 blog posts on a variety of registered investment adviser ("RIA") practice management and regulatory compliance topics. Our most popular posts relate to practice management and regulatory topics including business continuity plans, examination priorities, the new Form CRS, and Form ADV filings. Over 2,000 RIA firms rely on us not only for regulatory compliance consulting support and software, but also for guidance on how to best grow and scale an advisory firm.
Here are our top 10 practice management blog posts from 2020 highlighting some of the topics we frequently discuss with our clients:
- SEC Announces Coronavirus RIA Form ADV Amendment Filing Extension (March 16, 2020)
net capital requirements for state-registered firms all pertaining to the PPP.
- SEC Outlines 2020 RIA Examination Priorities (January 15, 2020)
This post was created to highlight the SEC’s Office of Compliance Inspections and Examinations ("OCIE") annual top exam priorities for the 2020 calendar year. OCIE is the SEC division which conducts examinations of RIA firms and this priority list can help investment advisers be better properly prepared for a regulatory examination. Nine priorities are discussed throughout the article; 1) fraud, sales practices, and conflicts; 2) retail-targeted investments; 3) standards of care; 4) financial technology and electronic investment advice; 5) compliance programs; and 6) cybersecurity. As RIA compliance consultants, we strongly recommend that the principals and Chief Compliance Officer of all investment advisory firms registered with the SEC, regardless if the firm has been examined before or not. Additionally the post includes links to SEC RIA examination and audit priorities for the past seven annual priority releases.
- SEC Continues to Issue Updates to Form CRS FAQs (April 21, 2020)
The initial filing of the Form ADV Part 3, commonly referred to as Form CRS, was due June 30, 2020. This blog post was created to overview the updates made in April to the SEC’s frequently asked questions ("FAQs") page addressing the common questions firms had when creating their firms Form CRS. While the Form ADV requires annual amendments for all RIAs who serve retail investors, the Form CRS is only required of firms registered with the SEC. The post lists many updates to the FAQs page, and it goes into depth for the Form CRS filing requirements, Form CRS delivery requirements, and the importance of filing with machine readable headings.
- How RIA in a Box Helps RIA Firms Create the Form CRS (February 11, 2020)
RIA in a Box designed a proprietary online Form CRS creation tool to streamline the creation and filing of an RIA firm’s Form ADV Part 3. This blog post discusses what to keep in mind about the Form CRS and overviews how RIA in a Box helps a firm create the Form CRS via the tool. Presently, SEC-registered RIA firms that serve retail investors are required to publicly file and provide the Form CRS to prospective and existing clients. In paper format, the Form CRS for investment advisers must not exceed two pages using reasonable paper size, font, and margins. The Form CRS creation tool was made available at no additional charge to all MyRIACompliance® subscribers. The tool utilizes the firm’s existing Form ADV data, along with a short, rules-based smart questionnaire. The form is crafted in “Plain English” so it is machine readable as required by the SEC. The process concludes when edits are finalized between the firm and a team of compliance experts.
- RIA Books and Records Requirement: Financial Statements (May 11, 2020)
RIA firms of every size are required to keep true, accurate, and current books and records related to financials. This is a requirement of both firms who are registered with the SEC and state-registered firms. For the SEC, requirements are mandated by Rule 204-2(a), or “Books and Records Rule”. States generally have books and records requirements which directly match or closely mirror the SEC's requirements. However, some states have additional or altered requirements as it relates to financial records. This blog post overviews the specific books and records requirements for SEC and State-registered firms, as well as discusses key financial terms for RIA firms to know. Too often, financial statement regulatory requirements are overlook by RIA firms and are one of the leading categories of regulatory compliance deficiencies discovered during regulatory examinations.
Drafting the new Form CRS was only the initial step of the new regulatory requirement. This blog post dives into what other priorities come after creating their Form CRS. SEC-registered RIA firms that serve retail investors were subject to this regulatory requirement also needed to focus on the filing, posting, and delivery of the new Form CRS. Additionally, new recordkeeping requirements are part the Form CRS requirement, with Rule (204)-2, the “Books and Records” rule amended to include a section related to Form CRS. These new recordkeeping requirements may require advisory firms to make significant changes to their compliance programs such as updates to their policies and procedures manual, investment advisory contract, and other documents. Firms may also need to utilize existing technology such as the firm's customer relationship management ("CRM"), document storage, and compliance software systems to ensure the new recordkeeping requirements are met.
As many RIA firms adapted their work from home and remote work policies, it is more important than ever to make sure that your firm has the proper systems and business continuity plan ("BCP") in place. The objective of establishing a business continuity plan is to hold the firm to their fiduciary obligations and minimize any potential harm to clients due to service interruption. This blog post discussed the following considerations when reviewing their BCP amidst a pandemic: (1) communication strategy; (2) regulatory considerations; (3) tech stack; and (4) cybersecurity. Once you have systems and plans in place and firms begin to return to their offices, don't forget to test your BCP to look for holes in your RIA firm's system and processes.
- Matching your RIA Firm's Form ADV Parts 1, 2, and 3 (Form CRS) (January 21, 2020)
The blog post was created to help RIA firms ensure their Form ADV Parts 1, 2 and 3 match in order to remain compliant. The 2019 Investment Adviser Coordinated Examinations Report published by the North American Securities Administrators Association listed inconsistencies between the Form ADV Part 1 and Part 2 as the most commonly cited registration-related investment adviser regulatory compliance deficiency. With the initial filing of Form ADV Part 3 (Form CRS), additionally required for SEC registered firms, its evermore important the forms are up to date and consistent with each other. Generally, new RIA firms will file an initial Form ADV that accurately reflects its business at the time of the firm's initial registration. However, as time passes, many RIA firms failed to update their Form ADV as the business evolves to reflect its current fee structure, services offered, assets under management, new conflicts of interest, etc. The post has additional information to learn more about the Form CRS and remaining compliant.
- RIA Pandemic Business Continuity Planning for Today and the Future (March 25, 2020)
This blog post was created to help RIA firms asses their advisory business and how it was being disrupted throughout the global pandemic but also by extension how their clients, personnel, and suppliers/vendors have also been impacted. The post overviews regulatory considerations and business continuity planning. Notably, the first step for any RIA firm was to promptly, conduct a high-level assessment of COVID-19’s impact on its business and operations. RIA firms need to ensure they have implemented a robust business continuity plan tailored to the COVID-19 pandemic and potential future pandemics. RIA in a Box clients have access to a business continuity plan section which specifically addresses pandemics, epidemics, and outbreaks categorized as following: (1) general business operations including client communication considerations; (2) remote operations; (3) vendors; (4) personnel including alternative forms of client meetings.