SEC is Cracking Down on CRS Violations. Is Your Firm in Compliance?


Compliance. Whether it is compliance in the administrative and support services industry (which has the most compliance regulations) or the financial services industry, the regulations associated with staying in compliance can create anxiety, a mountain of work, and the need for constant education on the ever-changing rules and requirements.


Registered investment advisors have to stay current with compliance rules and amendments, for not keeping in compliance results in penalties for both the supervising firm and their in-house compliance officers.


In 2019, the SEC announced the Customer Relationship Summary (CRS) regulations, which required RIAs to provide clients with a summary of what they do, how RIA’s are compensated, and the fees RIA’s charge. To date, the SEC has charged more than 40 financial firms for failing to meet the obligations set forth in the CRS regulation, and recently charged 12 firms with violations that resulted in civil penalties ranging from $10,000 to $25,000.

 

This article covers why compliance has been notoriously challenging for financial firms. We also provide compliance administration that many RIAs outsource to us so that they can achieve peace of mind.



 

Government Agencies are terrible at customer service


How can it be that some financial advisors and financial firms fail to follow regulations? When we discount the bad actors, we operate in an industry where the players are, for the most part, true fiduciaries. An industry of professionals that follow rules and procedures, all while doing everything they can to help their clients live their best lives and achieve their financial goals.


Surely the SEC is ready to answer an advisor’s call and provide on-the-spot guidance on compliance regulations and rule changes. Right? Have you ever tried to contact a government agency? Or better yet, get the answer to your question.


You know how frustrating it can be.


Government agencies are terrible at customer service, and while the SEC regulators are available to answer questions and provide guidance during audits, there is no substitute for having a compliance expert as part of your team.


Outsource Compliance Administration for Peace of Mind and Growth


The compliance needs of an RIA can vary depending on the business size and type. Smaller firms usually do not have a Chief Compliance Officer dedicated to handling the day-to-day compliance requirements, but larger companies may employ one or more individuals skilled in investment adviser regulations who help oversee their business's programs from start-up all the way through growth.


In both cases, financial advisors have daily, monthly, and quarterly compliance responsibilities. From documenting trades to maintaining records of client meetings, creating procedures, ensuring everyone at the firm is following protocol, staying up to date on cybersecurity threats and maintaining the safety of client data, and knowing what to do when new rules and regulations are passed.


The bottom line, compliance is a chore that is often best left to a dedicated resource.

While some compliance tasks may be mundane, and thereby managed in-house, outsourcing is often the best option due to the administrative nature of many compliance duties. Here are some ways AllBackoffice compliance administration services team can help:


  • Creating cybersecurity, privacy, business continuity, and succession planning policies

  • Navigate CRS compliance as it relates to disclosure, duty of care, and conflicts of interest obligations.

  • Annual amendments to Form ADV

  • Managing recurring compliance documentation, such as monthly trade confirmations, annual client risk tolerance questionnaires, maintenance, and upkeep of standard operating procedure documentation

  • Creating workflow and calendar alerts in CRM systems such as Redtail, to help advisors and our administrative staff, stay on target with all required compliance efforts.

  • Books and Records maintenance

  • Fee calculation and billing monitoring


By outsourcing administrative compliance tasks, financial advisors gain more time to focus on growing their firm, save money by reducing staff requirements, and experience greater peace of mind that comes with knowing a professional is managing the daily compliance tasks. At AllBackoffice, our team has extensive experience in helping firms maintain compliance and we can take the burden of compliance off your plate.


Have you considered working with a third-party expert to help manage your compliance duties? If not, now may be the time to do so! Contact us to learn more.