Registration, record-keeping and supervisory issues top the list of compliance deficiencies uncovered in reviews of smaller investment advisers by U.S. state regulators.
The North American Securities Administrators Association (NASAA), the umbrella group of state and provincial regulators, reported that compliance reviews of state-registered firms found that registration issues were most common (observed in 23% of reviews), followed by books and records (17%) and supervisory shortcomings (16%). State regulators have oversight of investment advisers with less than US$100 million in assets under management.
The other top issues involved deficiencies related to contracts and fees.
Books and records violations featured a “significant number of violations” related to client suitability information, NASAA said.
“Unfortunately, there were a number of deficiencies related to state investment advisers not having policies and procedures for suspected financial exploitation,” said Alisa Goldberg, director of the Florida division of securities and chair of NASAA’s investment adviser operations project group, in a release.
“Our hope is that this data will result in changes that increase investors’ confidence in their advisers and better protect them from investment fraud.”