Maintaining a compliant practice is becoming more challenging in the face of constantly changing regulations.

Many advisors are unsure of the extent of their compliance requirements and don’t fully understand the rules, says Deanna Taylor, a partner with Ara Compliance Support in Toronto.

“They are too busy with their businesses, they do not have the necessary internal resources or they do not have the knowledge [to deal with compliance issues],” Taylor says.

Philip Armstrong, CEO of Jovian Capital Corp., suggests that, while some advisors do not take compliance seriously enough, “there has been a vast improvement in compliance” among advisors generally.

Here are five steps you can take ensure you remain compliant.

1. Budget for the compliance costs
The cost of compliance, Taylor says, is a cost of being in business.

“You cannot be compliant,” she adds, “by doing just the bare minimum.”

Your budget should either include the hiring of internal resources or the use of an external compliance consultant.

The cost of compliance is increasing, Armstrong says, but it is unavoidable. “The risks of not being compliant,” he says, “are greater in the long run than the costs you forego.”

2. Use and update your compliance manual
The compliance manual, Taylor says, is a dynamic document that must be revised and amended regularly to include changes in policies and regulations.

Too many advisors never read the manual, Armstrong says.

In order to be compliant, he adds, you should ask yourself the following questions:
Do I know the rules under which I operate?
Do I have processes in place to ensure I’m compliant?

3. Report problems immediately
If you discover a compliance problem in your practice — such as a conflict of interest or a capital deficiency — inform the regulators immediately.

You will be better off doing so than trying to “fix” the deficiency. You might get away with it once in a while, Taylor says, but if you’re caught, the consequences will be much worse.

4. Maintain proper records
Make sure your books and records and “know your client” documents are always up-to-date. These, Taylor says, are the main areas on which regulators focus.

As well, she says, if you enter into referral arrangements with third parties, ensure that you have the appropriate documentation and that your centres of influence are registered with their appropriate regulatory bodies.

Never alter documents or destroy records.

5. Pay attention to your operating environment
Keep abreast of changes to regulations, Taylor says. Follow disciplinary rulings to help you understand why such rulings were issued. You might discover something that you need to correct in your own practice.

“Ignorance is one thing,” Taylor says. “Required disclosure is another.”