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Social media tops RIAs' compliance concerns, survey finds: SEC's pay-to-play rule, Form ADV Part 2 also top advisory firms' compliance chore list.

ADVISORY FIRMS ARE spending more time on compliance, with 92% of RIAs employing at least one full-time compliance specialist, an increase from 78% in 2010, according to a recently released compliance survey of 412 RIAs.

The Investment Adviser Association (IAA), ACA Compliance Group and Old Mutual Asset Management recently released their sixth annual Investment Management Compliance Testing Survey, which found the top five compliance concerns for RIA firms of all sizes are advertising and marketing, data security, custody, personal trading and regulatory reporting.

The survey also found that other top compliance concerns among small, midsized and large RIA firms are pay-to-play rules, social media, whistleblowing, Form ADV Part 2, insider trading, anti-bribery and financial crime as well as foreign advisory activities.

Among the participants, 7% indicated that they have more than 20 employees serving in a legal or compliance function, while 66% of chief compliance officers (CCOs) wear two or more hats and perform non-CCO functions. This is a decrease from the 2010 survey, in which 75% of CCOs performed non-CCO functions.

As to the SEC's pay-to-play rule, which restricts advisors' and their employees' ability to make political contributions to government officials to influence the selection of advisors to public pension funds and other government entities, 32% of the firms polled reported having adopted a stand-alone pay-to-play policy, while 38% reported that they have addressed pay-to-play as part of other compliance policies.

Sixty-four percent of the firms polled say they have adopted formal written policies and procedures to govern the use of social networking by the firm and employees.

Personal use of such social media sites by employees is permitted--subject to appropriate restrictions--at 54% of the firms responding. Sixteen percent impose no restrictions on the use of social networks, the survey found. But 29% of the firms say they prohibit the use of personal social networking websites for business purposes, while 83% of the respondents said they don't have a corporate social networking site.

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Author:Waddell, Melanie
Publication:Investment Advisor
Date:Sep 1, 2011
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