Compliance programs are simply the rules and procedures investment advisors and investment companies have laid out to make sure their business practices follow the rules established by securities laws. In other words, the company or advisor must examine how they do business, and compare this to their fiduciary obligations to their customers. If there are any risks of not meeting those obligations stemming from the way business is conducted, the company or advisor must make modifications to their business practice to reduce or eliminate those risks.

What Are Some of the Factors that Need to Be Addressed in the Investment Advisor’s Compliance Program?

There are some aspects of an advisor¿s business practices that are required to be addressed in the advisor¿s Compliance Program:

  • Trading practices
  • Accuracy of disclosures
  • Portfolio management
  • Privacy protection
  • Protecting client assets from inappropriate use
  • Creating and maintaining required records
  • Business continuity plans
  • Propriety trading of the adviser and personal trading activities of its employees
  • Marketing advisory services

What Are Some of the Factors that Need to Be Addressed in the Investment Company’s Compliance Program?

The requirements for the Compliance Program of an investment company not only involve developing procedures for monitoring and regulating the investment company’s businesses practices, but also to develop policies to monitor compliance programs of third party service providers (e.g., investment advisor, principal underwriter, administrator and transfer agent). Some of areas that must be covered in the company’s Compliance Program are:

  • Pricing of portfolio securities and the investment company’s shares
  • Processing of an investment company’s shares
  • Identification of affiliated persons – to prevent insider trading
  • Protection of nonpublic information
  • Compliance with fund governance requirements
  • Market timing compared to shareholder trades in and out of the company

The investment company is required to review the adequacy of its Compliance Program along with the compliance programs of its third party providers at least once a year.

What Should I Do if My Investment Company or Investment Advisor Is Violating Securities Laws to My Financial Detriment?

The first thing you will probably want to do, if it has not been done already, is to file a complaint with the SEC. Next, you may want to contact a securities attorney who specializes in securities law. Your attorney will be able to advise you of your rights and let you know if you are entitled to any money damages in a lawsuit against either your investment advisor or the investment company.