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Building an RIA
Compliance Program

Article preview:

The Registered Investment Advisor (RIA) market has swelled to 12,000 firms, posting a rapid 17 percent increase over the last two years1 and attracting the undesired attention of the Securities and Exchange Commission along the way. In response to this trend, and the approximately $70 trillion that RIAs now manage by the end of 2016, the SEC has hired and deployed 20 percent more examiners to supervise wealth managers and investment companies.

A formal AML program for RIAs entails detailed currency transaction reports for cash movements of $10,000 or more, suspicious activity reporting that is in line with the adviser’s risk profile, and accurate regulatory technologies (regtech) for verifying the ultimate beneficial owners of client accounts. Further compounding RIA compliance are the complex data-reporting mandates of the Dodd-Frank Act and new Department of Labor laws that impose strict fiduciary limits on advisers managing retirement account investments.

Key takeaways:

While the scope of legislative disruption may seem daunting and hard to navigate, there are several best practices that, with a high degree of certainty, mitigate the threat of enforcement action. For RIAs seeking to create and implement a top-flight RIA compliance program, the following five initiatives are foundational:

  • Delegate broad and sweeping supervisory controls to their chief compliance officers
  • Diagnose the highest probabilities for error and tailor a comprehensive, risk-based solution
  • Ensure that policies and procedures cover the full scope of the IAA, along with other relevant legislation
  • Ensure that annual audits and regulatory technology are adequate
  • Digitize all record-keeping systems and practices to confirm that violations are being dealt with appropriately and in a timely manner


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