Advisers’ Concerns of Off-Channel Communications Surpasses the Marketing Rule as Top Compliance Concern, Survey Reveals
16 Julio 2024 - 5:00AM
Business Wire
Marketing and artificial intelligence (AI)
follow closely behind
Advisers’ concerns of off-channel communications eclipsed the
Marketing Rule as the top compliance concern, according to the 2024
Investment Management Compliance Testing Survey published
today.
Electronic communications surveillance/off-channel
communications was identified by 59% of survey respondents as
the “hottest” compliance topic. Advertising/marketing
followed closely by 57% of respondents and AI/predictive
analytics debuted in third place, with 46% of respondents
including this on their list of hot topics. Other hot topics
generally aligned with the SEC’s exam, enforcement, and rulemaking
priorities. These key focus areas included:
- 37% cybersecurity
- 16% private funds
- 10% conflicts of interest
- 8% vendor due diligence
- 8% environmental, social, and governance
- 6% anti-money laundering
- 6% books and records
Now in its 19th year, the Investment Management Compliance
Testing Survey is a joint project of the Investment Adviser
Association, ACA Group, and Yuter Compliance Consulting. It is the
most comprehensive resource available for identifying the top
concerns of investment management compliance professionals and the
types of compliance testing and control practices investment
adviser firms are using to address core compliance topics.
Notable Findings
The 2024 survey, conducted online throughout May, covered a wide
range of topics and offered extensive insight into common control
strategies. In addition to the top compliance hot topics, the
survey provided notable findings on subjects such as:
- The industry is focused on SEC exams, with 83% of
respondents reporting that they are undergoing an exam or have been
examined in the past 5 years. The top examiner focus areas on
recent SEC exams were reported as: #1 books and records (58%),
#2 advertising and marketing (57%), and #3 conflicts of interest
(50%).
- Investment advisers are enhancing their compliance programs,
with 65% having conducted or intending to conduct a mock SEC
exam, for example, as well as increased testing. A significant
portion of respondents (85%) reported that a mock exam prepared
them for an actual SEC exam and identified issues and best practice
enhancements.
- The top areas of increased testing include: #1
electronic communication surveillance/off-channel communications
(73%), #2 advertising/marketing (65%), #3 cybersecurity (57%), #4
vendor due diligence (44%), and #5 books and records (36%). These
top areas are in line with SEC rulemaking and enforcement focus
areas reflecting a proactive industry; a continuing trend
over the last several years. Also, the majority of respondents
did not decrease testing in any area.
“With SEC staff calling for a testing program in the compliance
rule, and certain rule adopting releases encouraging the
consideration of industry common practices, this survey
consistently delivers testing and control ideas, trending insight,
and practical enhancement opportunities to the industry,” shared
Amy Yuter, Managing Principal of Yuter Compliance Consulting. “We
are motivated to move into our 20th anniversary year with feedback
of the survey’s value in deciphering regulatory expectations and
common industry practice.”
ACA’s Global Advisory Leader Carlo di Florio shared his
reflection on the survey saying, “The increasing focus on
off-channel communications underscores the need for robust
electronic surveillance strategies to mitigate risks and safeguard
client data. Marketing, artificial intelligence (AI), cyber, and
vendor oversight are other key hot topics investment advisers are
testing and grappling with. Investment advisers who prioritize
compliance, conduct mock exams, and embrace industry best practices
are better positioned to navigate the complexities of today's
regulatory environment.”
“Investment advisers are enhancing their compliance programs to
address new regulations and risks as well as to maintain their
focus on their bread-and-butter compliance functions,” said IAA
President and CEO Karen Barr. “The survey reflects increased
testing in critical areas as the workload for compliance officers
continues to expand significantly.”
About the Survey Respondents
Compliance professionals at 595 investment adviser firms
participated in the survey. All firm sizes were represented – with
26% of respondents managing less than $1 billion in assets, 41%
managing $1 billion to $10 billion, and 34% managing more than $10
billion. Close to half (42%) of responding firms reported having
between 11 and 50 employees, consistent with industry data showing
that most investment advisers are small- to mid-sized businesses.
This year’s survey also revealed that the majority of CCOs (58%)
continue to wear more than one hat (with 18% also serving in some
legal capacity).
Services provided by responding firms spanned the full range of
client types, including retail individuals with a typical account
size of $1 million or less (35% of respondents), private funds
(60%), ERISA assets/pension consultants (45%), institutional
clients (58%), and high net worth individuals (56%).
Full results of the 2024 Investment Management Compliance
Testing Survey are available on the IAA’s, ACA’s, and YCC’s
websites, and here.
About the Investment Adviser Association
The Investment Adviser Association (IAA) is the leading trade
association representing the interests of fiduciary investment
advisers. The IAA’s member firms collectively manage more than $35
trillion in assets for a wide variety of institutional and
individual investors. In addition to serving as the voice of the
advisory profession on Capitol Hill and before the SEC, DOL, CFTC
and other U.S. and international regulators, the IAA provides
extensive practical and educational resources to its membership.
For more information, visit www.investmentadviser.org or follow us
on LinkedIn, Twitter and YouTube.
About ACA Group
ACA Group (ACA) is the leading governance, risk, and compliance
(GRC) advisor in financial services. For over 20 years, we’ve
empowered our clients to launch, grow, and protect their business.
Our global team of 1,250 employees includes former regulators and
practitioners with a deep understanding of the regulatory
landscape. Our innovative approach integrates advisory, managed
services, distribution solutions, and analytics with our
ComplianceAlpha® technology platform. For more information, visit
www.acaglobal.com.
About Yuter Compliance Consulting
Yuter Compliance Consulting (YCC) is an internationally
recognized boutique compliance consulting firm offering
consultation and support services trusted by the industry’s chief
compliance officers. Amy Yuter, Managing Principal of Yuter
Compliance Consulting, has over 30 years of industry, consultation
and SEC regulatory experience in overseeing investment advisers,
investment companies, public companies, broker-dealers, and private
funds. Amy is the founder of The Philadelphia Compliance Roundtable
and the Investment Management Compliance Testing Survey. Yuter
Compliance Consulting partners with clients to provide personalized
consultation and support to enhance compliance resources and
improve compliance programs. For more information, visit
www.yutercompliance.com.
Note: Due to rounding, the sum of these results does not equal
100%.
TAGS: Compliance Testing Survey, Compliance
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Press At the Investment Adviser Association, please
contact Janay Rickwalder at janay.rickwalder@investmentadviser.org
At ACA Group, please contact BackBay Communications at
aca@backbaycommunications.com At Yuter Compliance Consulting,
please contact Amy Yuter at ayuter@yutercompliance.com