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Compliance Practices Survey Shows Insufficient Resources Devoted to Compliance

Compliance Practices Survey Shows Insufficient Resources Devoted to Compliance

The Investment Adviser Association, together with ACA Compliance, released its annual Investment Management Compliance Testing Survey, which offers an industry snapshot of compliance practices.  Nearly two-thirds of CCOs have multiple roles within the firm, even though over 90% of firms claim to have a full-time person devoted to compliance.  Less than one-third of firms even have a compliance budget, and approximately 50% said they spend less than 5% of revenue on compliance issues.  The report offers some examples of how to conduct testing in areas such as fees, referral/solicitation arrangement, directed brokerage, and soft dollars.  The survey also shows increased focus on social media, valuation, and advertising/marketing.
OUR TAKE: The survey data has a significant anomaly: 90% of firms cannot have a full-time person devoted to compliance while two-thirds of firms have CCOs with multiple roles.  We believe many firms are in denial about their compliance obligations if 2/3 of firms don’t have at least one person focused exclusively on compliance, refuse to establish a budget, and spend less than 5% of revenue on compliance.  
https://www.investmentadviser.org/eWeb/docs/Publications_News/Reports_and_Brochures/Investment_Management_Compliance_Testing_Surveys/2013IMCTSppt.pdf
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