The US SEC (Securities and Exchange Commission) laid forward a regulatory framework and a set of rules for all RIAs or Registered Investment Advisers under the Securities Exchange Act of 1934. All RIAs need to adhere to these compliances as it involves establishing proper/accurate fiduciary duty, transparency, and disclosure when managing the client’s assets and providing effective investment advice. RIAs follow this strict guideline to provide the required protection to their investors or clients.
You must follow the RIA compliance requirements which require adherence to the Investment Advisers Act of 1940 (SEC) to ensure you can operate, manage, and grow as per your business goals/objectives successfully. This includes avoiding conflicts of interest, acting in the best interests of clients, maintaining accurate records, and more.
Next, the reasons to follow these vital RIA compliance requirements when conducting your business are explained in detail for your better understanding. So, do keep reading!
Types of RIA Compliance Requirements
All RIAs must understand the commonality between the US SEC compliance and State-specific compliance rules to ensure you are following the required rules and regulations accordingly for your and your business’s overall benefit. Take your time to go through the different types of RIA compliance obligations. There is a brief list to introduce them:
- Regulatory registration and required filing
- Overseeing compliance adherence and employee training
- Conduct your fiduciary duty while maintaining the provided code of ethics
- Proper incorporation of anti-fraud measures in marketing and advertising, and book/record keeping
- Accurate examination, reporting, and disclosure which also includes disclosure of proxy voting policies
- Safeguarding the clients’ assets
- State-specific compliance requirements which include additional registration, fees, disclosure, record keeping, etc.
When You First Register as an RIA
You have to start by filing Form ADV to provide the required information about your business. The next thing that you have to do is to register as an RIA for the first time and then understand custody rules and the code of ethics. You have to provide proper disclosure next and set up proper record-keeping and anti-fraud maintenance.
You will need SEC if AUM goes beyond the SEC threshold. On the other hand, consider the state-specific initial registration rules if AUM does not cross the SEC threshold. It is an absolute must to follow the initial compliance rules accurately for successful regulatory approval, adequate legal protection, proper risk mitigation, gaining clients’ trust, and building a good reputation.
Ongoing Compliance Requirements
The reputed SEC and also DOL are known for setting new rules and regulations every year. Hence, knowing about the ongoing requirements and obligations at the time of your registration is highly recommended. Take appropriate steps to check the ever-changing RIA compliance rules and regulations. So, you have to conduct effective reporting periodically with the required operational and financial information. Understand and explore your regulatory reporting requirements better for this.
Changes in Industry Rules and Regulations
All the recent changes seen in industry rules and regulations have brought significant changes; may it be the fiduciary standard enhancement, Anti-Money Laundering (AML) enhancements, or the new regulatory updates made. These changes effectively can reshape the whole landscape of RIA compliance requirements. Staying updated becomes a necessity as the impact will influence how you manage your investment, interact with clients, adapt to the latest trends, disclose information, and so on.
When There Are Changes to Your RIA Firm
You have to fulfill certain vital compliance requirements if there is a shift in your RIA firm, for example, new ownership or a merger. This includes steps like accessing new conflicts, updating disclosure, notifying regulatory authorities, securing the consent of clients, and so on. Such measures ensure proper adherence to the firm’s and SEC or State’s regulations.
When Investment Strategy or Portfolio Management Changes
The RIA compliance requirements will be impacted when there is a change in your investment portfolio management approach. A change in the RIA firm’s investment strategy will also play a factor. The changes will affect how the business sees its new disclosure obligations, risks, etc. Hence, you must update to reflect all the changes and compliances accurately. You should notify regulatory authorities for proper accountability, transparency, and communication. This also ensures the client’s interest is protected as well.
When Engaging with Clients
One of the requirements involves the firm asking for consent when transferring accounts. It is the same if you continue to manage your client’s investment under the firm’s structure. You have to provide the required information to your onboarding clients. You also have to notify or communicate with your existing and potential clients about any new changes that you have made in your RIA firm.
Conclusion
The compulsory RIA compliance requirements should be followed accurately even though the requirements are strict and require a firm to take many steps. Adhering to these obligations allows all RIAs to conduct their business operations and management of investment and client’s trust effectively which leads to the fulfillment of the firm’s overall goals.
Title: When Should I Follow RIA Compliance Requirements?
Slug: when-should-I-follow-RIA-compliance-requirements/
The US SEC (Securities and Exchange Commission) laid forward a regulatory framework and a set of rules for all RIAs or Registered Investment Advisers under the Securities Exchange Act of 1934. All RIAs need to adhere to these compliances as it involves establishing proper/accurate fiduciary duty, transparency, and disclosure when managing the client’s assets and providing effective investment advice. RIAs follow this strict guideline to provide the required protection to their investors or clients.
You must follow the RIA compliance requirements which require adherence to the Investment Advisers Act of 1940 (SEC) to ensure you can operate, manage, and grow as per your business goals/objectives successfully. This includes avoiding conflicts of interest, acting in the best interests of clients, maintaining accurate records, and more.
Next, the reasons to follow these vital RIA compliance requirements when conducting your business are explained in detail for your better understanding. So, do keep reading!
Types of RIA Compliance Requirements
All RIAs must understand the commonality between the US SEC compliance and State-specific compliance rules to ensure you are following the required rules and regulations accordingly for your and your business’s overall benefit. Take your time to go through the different types of RIA compliance obligations. There is a brief list to introduce them:
- Regulatory registration and required filing
- Overseeing compliance adherence and employee training
- Conduct your fiduciary duty while maintaining the provided code of ethics
- Proper incorporation of anti-fraud measures in marketing and advertising, and book/record keeping
- Accurate examination, reporting, and disclosure which also includes disclosure of proxy voting policies
- Safeguarding the clients’ assets
- State-specific compliance requirements which include additional registration, fees, disclosure, record keeping, etc.
When You First Register as an RIA
You have to start by filing Form ADV to provide the required information about your business. The next thing that you have to do is to register as an RIA for the first time and then understand custody rules and the code of ethics. You have to provide proper disclosure next and set up proper record-keeping and anti-fraud maintenance.
You will need SEC if AUM goes beyond the SEC threshold. On the other hand, consider the state-specific initial registration rules if AUM does not cross the SEC threshold. It is an absolute must to follow the initial compliance rules accurately for successful regulatory approval, adequate legal protection, proper risk mitigation, gaining clients’ trust, and building a good reputation.
Ongoing Compliance Requirements
The reputed SEC and also DOL are known for setting new rules and regulations every year. Hence, knowing about the ongoing requirements and obligations at the time of your registration is highly recommended. Take appropriate steps to check the ever-changing RIA compliance rules and regulations. So, you have to conduct effective reporting periodically with the required operational and financial information. Understand and explore your regulatory reporting requirements better for this.
Changes in Industry Rules and Regulations
All the recent changes seen in industry rules and regulations have brought significant changes; may it be the fiduciary standard enhancement, Anti-Money Laundering (AML) enhancements, or the new regulatory updates made. These changes effectively can reshape the whole landscape of RIA compliance requirements. Staying updated becomes a necessity as the impact will influence how you manage your investment, interact with clients, adapt to the latest trends, disclose information, and so on.
When There Are Changes to Your RIA Firm
You have to fulfill certain vital compliance requirements if there is a shift in your RIA firm, for example, new ownership or a merger. This includes steps like accessing new conflicts, updating disclosure, notifying regulatory authorities, securing the consent of clients, and so on. Such measures ensure proper adherence to the firm’s and SEC or State’s regulations.
When Investment Strategy or Portfolio Management Changes
The RIA compliance requirements will be impacted when there is a change in your investment portfolio management approach. A change in the RIA firm’s investment strategy will also play a factor. The changes will affect how the business sees its new disclosure obligations, risks, etc. Hence, you must update to reflect all the changes and compliances accurately. You should notify regulatory authorities for proper accountability, transparency, and communication. This also ensures the client’s interest is protected as well.
When Engaging with Clients
One of the requirements involves the firm asking for consent when transferring accounts. It is the same if you continue to manage your client’s investment under the firm’s structure. You have to provide the required information to your onboarding clients. You also have to notify or communicate with your existing and potential clients about any new changes that you have made in your RIA firm.
Conclusion
The compulsory RIA compliance requirements should be followed accurately even though the requirements are strict and require a firm to take many steps. Adhering to these obligations allows all RIAs to conduct their business operations and management of investment and client’s trust effectively which leads to the fulfillment of the firm’s overall goals.
