IAA Releases Compliance Testing Survey Results

The Investment Adviser Association has released the results of its 2012 adviser compliance testing survey of over 500 compliance professionals. Some of the most notable findings include: (i) most firms (94%) have somebody dedicated to compliance but in most cases (67%) that person has multiple roles within the firm; (ii) more than half the firms advise a private fund; (iii) firms have increased testing around pay-to-play, advertising and marketing, personal trading, and social media and have decreased focus around custody and data security; (iv) firms do use automated systems but mostly around personal trading; (v) testing performance advertising needs improvement as fewer than half the firms pull a sample of marketing materials for testing and even fewer test for performance dispersion; (vi) less than half claim GIPS compliance; (vii) most firms require pre-clearance of political contributions and periodic compliance certifications for pay-to-play; (viii) over 80% of firms conduct some sort of best execution reviews; (ix) most firms use third party service providers but perform very little ongoing supervision; and (x) 80% of firms have a social networking policy and most (54%) prohibit use of social networking for business purposes.