The investment adviser compliance manual is an important document that outlines the key compliance requirements, policies, and procedures that investment advisers must follow. It covers areas like record keeping, reporting, advertising, fees, conflicts of interest, and supervision of personnel.
Having clear compliance policies is crucial for investment advisers to meet regulatory obligations, protect investors, and avoid significant fines or other disciplinary actions if violations occur. As the investment industry continues to grow in complexity, detailed compliance manuals help advisers implement appropriate controls.
Core compliance requirements for investment advisers
The compliance manual provides guidance to investment advisers on core compliance requirements like:
– Registering with regulatory bodies like the SEC or state securities regulators
– Maintaining books and records with detailed information on client accounts, transactions, communications and advisory activities
– Disclosing key information to clients and investors through documents like Form ADV and brochures
– Safeguarding client assets by having custody procedures and controls in place
– Conducting due diligence on investments and having policies for best execution
– Implementing a code of ethics and personal trading policies
– Putting supervisory procedures in place to monitor adviser activities
– Following regulations related to fees, performance advertising and other communications
Creating a culture of compliance
The compliance policies in a manual only work well when combined with efforts to build a strong culture of compliance across the firm. This means that management and supervisors should:
– Lead by example in following all compliance regulations to set the tone at the top
– Provide regular training to employees on core compliance policies
– Encourage transparency and open communication channels around compliance without fear of retaliation
– Update compliance manuals periodically to address new risks or requirements
– Dedicate sufficient resources and empower compliance staff
– Use spot checks, self assessments and audits to identify and remedy gaps
Customizing the manual
While regulations form the foundation, investment advisers need to customize compliance manuals to match their specific business activities, services, investment strategies, technology tools, and unique risks. For example, SEC-registered advisers with discretionary client accounts will need more custody procedures versus state-registered advisers providing non-discretionary planning services.
Effective manuals evolve over time as firms grow, regulations change, new products or digital tools emerge. Maintaining an up-to-date manual and keeping staff and management aligned on changes is an essential compliance activity.
Compliance manuals that outline key policies on important areas like reporting, supervision and disclosure help investment advisers implement principled practices, meet obligations to clients and regulators, as well as avoid significant fines or reputational damage from non-compliance events.