NASAA Data Shows More Exams and More Deficiencies
The North American Securities Administrators Association (NASAA), the organization of state securities regulators, released its biennial report of examination results, which showed a marked increase in exams and cited deficiencies. State securities exams are up 37% since 2011 (825 to 1130) and cited deficiencies are up 83% (6482 vs. 3543). The most cited deficiencies are books and records concerning suitability, ADV inadequacies, fee calculation missteps, failure to deliver privacy notices, and failure to deliver disclosure documents. Books and records deficiencies were cited in over 68% of exams and registration issues were cited in over 58% of exams.
OUR TAKE: The data suggest that state registered investment advisers are increasingly likely to undergo an exam and that such exams will cite regulatory deficiencies.