Tuesday, November 1, 2011

Annual Chief Compliance Officer Report

Reminder: Annual CCO Report

As a reminder, Rule 206(4)-7 of the Investment Advisers Act of 1940 and related state regulations require that Advisors implement (and maintain) a compliance program that is designed to prevent, detect and correct any violations of the securities laws. 

Also, the Chief Compliance Officer ("CCO") of the Advisor must review the compliance program at least annually to demonstrate compliance with this rule. The regulators expect to see documentation of this effort through testing and an annual assessment. There is no require to deliver any report or output to the regulators, but AdvisorAssist suggests a report to file or memo from the CCO to the CEO or Management. This is still a good practice even in a one person firm.

What should be contained in the report?
The annual CCO report should at least address these four (4) main areas:

  1. What changes have been made to the compliance program since the last annual review (or since inception for a new Advisor)? For instance, did you modify your compliance manual, update the Code of Ethics, change technology? 
  2. Have there been any compliance violations or issues encountered? Examples might include trading errors, failure to make disclosures, missed deadlines, not following your policies and procedures, forgetting to deliver an ADV...(Don't be afraid to document an error. The intent of the rule continuous improvement. It is best to acknowledge an issue, contain it, take corrective action and prevent re-occurrence. 
  3. Any changes to staffing or support? Make note of your relationship with AdvisorAssist and other partners that support your business.
  4. Any changed planned from your review or testing? Do you have any planned changes for the next year? New systems, more training, more staff, outsourcing, a new document management system? Of course only list the items that you intend to commit to.
What format should the report take?

The annual CCO report does not require a specific layout. What is most effective for you to make the exercise worthwhile and actionable? It can paragraph form, bullets, or links to other places where actions are taken. It can be all or any of these items. 

If you have any questions or would like a template, please email us at support@advisorassist.com. There are also some tools to help you in the Compliance Advantage Resource Portal at http://advantage.advisorassist.com.


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