How To Investigate A Registered Investment Advisor

Information for Newly-Registered Investment Advisers

Nov 23, 2010 [Update Currently in Progress]

Prepared past the Staff of the Securities and Substitution Commission's Segmentation of Investment Direction and Office of Compliance Inspections and Examinations¹

This data sheet contains general data nigh certain provisions of the Investment Advisers Human activity of 1940 (also chosen the "Advisers Human action") and selected rules under the Advisers Human action. It is intended to assist newly-registered investment directorate in understanding their compliance obligations with respect to these provisions. This data canvas also provides information about the resource available to investment advisers from the SEC to assist advisers understand and comply with these laws and rules.

Every bit an adviser registered with the SEC, yous have an obligation to comply with all of the applicable provisions of the Advisers Act and the rules that have been adopted by the SEC. This information sheet does non provide a complete description of all of the obligations of SEC-registered advisers under the law. To access the Advisers Act and rules and other information, visit the SEC's website at www.sec.gov (the Directorate Act and rules are available at http://www.sec.gov/divisions/investment.shtml).ⁱⁱ

Investment Advisers Are Fiduciaries

Equally an investment adviser, you are a "fiduciary" to your advisory clients. This means that you lot have a primal obligation to deed in the best interests of your clients and to provide investment advice in your clients' all-time interests. Y'all owe your clients a duty of undivided loyalty and utmost good faith. You should not engage in any activity in disharmonize with the interest of any client, and you should take steps reasonably necessary to fulfill your obligations. You must employ reasonable intendance to avoid misleading clients and you must provide full and fair disclosure of all material facts to your clients and prospective clients. Generally, facts are "material" if a reasonable investor would consider them to be of import. You lot must eliminate, or at least disembalm, all conflicts of interest that might incline you lot — consciously or unconsciously — to render advice that is not disinterested. If you lot exercise not avert a disharmonize of interest that could impact the impartiality of your advice, you must fill up and frank disclosure of the conflict. You cannot use your clients' assets for your own benefit or the benefit of other clients, at least without client consent. Deviation from this fiduciary standard may constitute "fraud" upon your clients (under Department 206 of the Directorate Human activity).

Investment Advisers Must Have Compliance Programs

As a registered investment adviser, yous are required to prefer and implement written policies and procedures that are reasonably designed to foreclose violations of the Advisers Act. The Commission has said that it expects that these policies and procedures would be designed to foreclose, detect, and correct violations of the Advisers Deed. You must review those policies and procedures at least annually for their adequacy and the effectiveness of their implementation, and designate a chief compliance officer ("CCO") to be responsible for administering your policies and procedures (under the "Compliance Rule" — Rule 206(iv)-7).

We note that your policies and procedures are not required to incorporate specific elements. Rather, yous should analyze your individual operations and identify conflicts and other compliance factors that create risks for your house and and so design policies and procedures that address those risks. The Commission has stated that it expects your policies and procedures, at a minimum, to address the following issues to the extent that they are relevant to your business:

Portfolio management processes, including allocation of investment opportunities amongst clients and consistency of portfolios with clients' investment objectives, your disclosures to clients, and applicable regulatory restrictions;
The accurateness of disclosures fabricated to investors, clients, and regulators, including account statements and advertisements;
Proprietary trading past y'all and the personal trading activities of your supervised persons;
Safeguarding of client avails from conversion or inappropriate use by your personnel;
The authentic creation of required records and their maintenance in a fashion that secures them from unauthorized alteration or apply and protects them from untimely destruction;
Safeguards for the privacy protection of customer records and data;
Trading practices, including procedures by which you satisfy your best execution obligation, use client brokerage to obtain research and other services (referred to as "soft dollar arrangements"), and allocate aggregated trades among clients;
Marketing advisory services, including the utilize of solicitors;
Processes to value customer holdings and assess fees based on those valuations; and
Business continuity plans.

Investment Advisers Are Required to Set Certain Reports and to File Certain Reports with the SEC

Every bit a registered investment adviser, you are required to file an almanac update of Part 1A of your registration form (Form ADV) through the Investment Advisers Registration Depository (IARD). You lot must file an annual updating amendment to your Form ADV within 90 days later the end of your fiscal yr. In addition to making annual filings, y'all must promptly file an amendment to your Form ADV whenever certain information independent in your Course ADV becomes inaccurate (the Form ADV filing requirements are independent in Dominion 204-one of the Advisers Human activity, and in the instructions to the Grade).

Make certain your Form ADV is complete and current. Inaccurate, misleading, or omitted Class ADV disclosure is the almost frequently cited finding from our examinations of investment advisers.
Delight keep the electronic mail accost of your contact person electric current (Form ADV, Part 1A, Item 1J). Nosotros apply this e-mail accost to go on you apprised of important developments (including when it's time to file an amendment to your Course ADV).
Accurately study the amount of assets that you have under management (Grade ADV, Office 1A, Particular 5F(2)). Advisers who have less than $25 million of avails under management, who are not otherwise eligible to maintain their registration with the SEC, or who cease doing business concern as an investment adviser, should file a Course ADV-West through IARD to withdraw their registration.

With respect to Role 2A of your Form ADV, yous are required to file it electronically through IARD. As with Role 1A, you must update Part 2 annually inside ninety days of the end of your fiscal year and whenever it becomes materially inaccurate. Part 2B brochure supplements, are non required to exist uploaded to IARD.

You may too be subject to other reporting obligations. For case, an adviser that exercises investment discretion (or that shares investment discretion with others) over certain equity securities (including convertible debt and options), which have a fair market value in the aggregate of $100 million or more, must file a Form 13F each quarter that discloses these holdings. "Discretionary authority" means that y'all take the authority to decide which securities to purchase, sell, and/or retain for your clients.

You should also be aware that it is unlawful to make any untrue statement or omit any textile facts in an application or a study filed with the SEC (under Department 207 of the Advisers Act), including in Form ADV and Form ADV-W.

Investment Advisers Must Provide Clients and Prospective Clients with a Written Disclosure Statement

Registered investment advisers are required to provide their advisory clients and prospective clients with a written disclosure certificate (these requirements, and a few exceptions, are set forth in Dominion 204-3 nether the Advisers Act). Every bit a registered adviser, you comply with this requirement by providing advisory clients and prospective clients with Part ii of your Class ADV. This written disclosure document should be delivered to your prospective clients earlier or at the time of entering into an advisory contract (under certain weather, yous may comply with the commitment requirements through electronic media).

Each year, yous also need to deliver Function 2 or summary of textile changes to each client, without charge. Y'all are required to maintain a copy of each disclosure document and each subpoena or revision to it that was given or sent to clients or prospective clients, along with a record reflecting the dates on which such disclosure was given or offered to exist given to whatsoever client or prospective client who subsequently became a client (under Rule 204-2(a)(xiv)).

Investment Advisers Must Have a Code of Ethics Governing Their Employees and Enforce Certain Insider Trading Procedures

Equally a registered investment adviser, you are required to adopt a code of ideals (under the "Code of Ethics Rule" — Rule 204A-1 under the Advisers Act). Your code of ethics should set forth the standards of business conduct expected of your "supervised persons" (i.eastward., your employees, officers, directors and other people that you are required to supervise), and it must address personal securities trading by these people.

We notation that you are not required to adopt a item standard of concern ethics. Rather, the standard that yous choose should reflect your fiduciary obligations to your informational clients and the fiduciary obligations of the people you supervise, and require compliance with the federal securities laws. In adopting a code of ideals, investment advisers may set higher ethical standards than the requirements under the law.

In gild to prevent unlawful trading and promote upstanding conduct by advisory employees, advisers' codes of ideals should include certain provisions relating to personal securities trading past advisory personnel. Your code of ethics must include the following requirements:

Your "access persons" must report their personal securities transactions to your CCO or to another designated person each quarter. "Access persons" are any of your supervised persons who take access to non-public data regarding client transactions or holdings, brand securities recommendations to clients or have access to such recommendations, and, for most advisers, all officers, directors and partners.
Your access persons must submit a complete report of the securities that they agree at the time they starting time become an access person, and then at least in one case each yr after that.ⁱⁱⁱ Your lawmaking of ethics must besides require that your admission persons obtain your approval prior to investing in initial public offerings or private placements or other express offerings, including pooled investment vehicles (except if your house has merely one admission person).
Your CCO or another person you designate in addition to your CCO must review these personal securities transaction reports.
Your supervised persons must promptly written report violations of your lawmaking of ethics (i.east., including the federal securities laws) to the CCO or to another person yous designate (provided your CCO also receives a report on such issues). You must also maintain a record of these breaches.

Besides, every bit a registered investment adviser, you are required to establish, maintain, and enforce written policies and procedures that are reasonably designed to prevent the misuse of material non-public data (under Section 204A of the Advisers Human action). These policies and procedures must encompass your activities and those of your supervised persons. Directorate frequently include this prohibition on insider trading in their code of ethics.

Provide each of the people that you supervise with a copy of your lawmaking of ideals (and any amendments that you lot subsequently brand to it), and likewise obtain a written acknowledgement from the supervised person that he/she has received information technology. In addition, y'all must describe your code of ideals in your Form ADV, Function 2, Detail eleven and provide a copy to your advisory clients, if they request it.

Investment Directorate are Required to Maintain Sure Books and Records

As a registered adviser, you must make and keep true, accurate and electric current sure books and records relating to your investment informational business organisation (under "the Books and Records Dominion" — Dominion 204-2). The books and records that you lot must brand and keep are quite specific, and are described below in part:

Advisory business fiscal and accounting records, including: cash receipts and disbursements journals; income and expense account ledgers; checkbooks; bank account statements; advisory business organization bills; and financial statements.
Records that pertain to providing investment advice and transactions in client accounts with respect to such communication, including: orders to trade in client accounts (referred to as "society memoranda"); trade confirmation statements received from broker-dealers; documentation of proxy vote decisions; written requests for withdrawals or documentation of deposits received from clients; and written correspondence you sent to or received from clients or potential clients discussing your recommendations or suggestions.
Records that certificate your authorisation to conduct business in client accounts, including: a list of accounts in which you lot have discretionary authority; documentation granting you discretionary authority; and written agreements with clients, such as advisory contracts.
Advertising and performance records, including: newsletters; manufactures; and computational worksheets demonstrating performance returns.
Records related to the Code of Ethics Rule, including those addressing personal securities transaction reporting past access persons.
Records regarding the maintenance and delivery of your written disclosure document and disclosure documents provided by certain solicitors who seek clients on your behalf.
Policies and procedures adopted and implemented under the Compliance Rule, including whatever documentation prepared in the course of your annual review.

Some advisers are required to maintain additional records. For example, advisers that have custody and possession of clients' funds and/or securities must make and keep additional records that are described in the Books and Records Rule (Dominion 204-ii, paragraph (b)), and advisers who provide investment supervisory or management services to any customer must likewise make and keep specific boosted records (which are described in Dominion 204-2, paragraph (c)).

You must go on these records for specified periods of fourth dimension. Mostly, well-nigh books and records must be kept for five years from the last day of the fiscal year in which the concluding entry was made on the document or the document was disseminated. You lot may exist required to go along sure records for longer periods, such every bit records that support performance calculations used in advertisements (equally described in Dominion 204-2, paragraph (eastward)).

You are required to keep your records in an easily attainable location. In improver, for the kickoff two of these years, you must proceed your records in your office(s). If you maintain some of your original books and records somewhere other than your primary office and place of business, yous must annotation this practice and identify the alternative location on your Form ADV (in Section 1K of Schedule D). Many advisers store indistinguishable copies of their advisory records in a location split from their chief office in lodge to ensure the continuity of their business in the case of a disaster.

You may shop your original books and records by using either micrographic media or electronic media. These media generally include microfilm or digital formats (e.g., electronic text, digital images, proprietary and off-the-shelf software, and electronic mail). If you use electronic mail or instant messaging to make and keep the records that are required under the Directorate Human action, you should keep the e-mail, including all attachments that are required records, as examiners may asking a copy of the complete record. In dealing with electronic records, you must as well accept precautions to ensure that they are secure from unauthorized admission and theft or unintended destruction (similar safeguarding provisions regarding client information obtained past y'all is required by Regulation Due south-P under the Gramm-Leach-Bliley Act). In general, y'all should be able to promptly (generally inside 24 hours) produce required electronic records that may be requested by the SEC staff, including email. In social club to do so, the Advisers Act requires that you suit and index required electronic records in a fashion that permits like shooting fish in a barrel location, access, and retrieval of any particular electronic record.

Investment Advisers Must Seek to Obtain the Best Price and Execution for Their Clients' Securities Transactions

As a fiduciary, you are required to human activity in the all-time interests of your informational clients, and to seek to obtain the best cost and execution for their securities transactions. The term "all-time execution" means seeking the best price for a security in the marketplace as well as ensuring that, in executing client transactions, clients practice not incur unnecessary brokerage costs and charges. You are non obligated to get the lowest possible commission cost, but rather, you should determine whether the transaction represents the best qualitative execution for your clients. In addition, whenever trading may create a conflicting interest between y'all and your clients, you take an obligation, before engaging in the activity, to obtain the informed consent from your clients later providing full and fair disclosure of all material facts. The Commission has described the requirement for advisers to seek best execution in diverse situations.

In selecting a broker-dealer, y'all should consider the full range and quality of the services offered past the broker-dealer, including the value of the research provided, the execution capability, the commission rate charged, the broker-dealer'due south financial responsibility, and its responsiveness to you. To seek to ensure that you are obtaining the all-time execution for your clients' securities trades, you lot must periodically evaluate the execution performance of the broker-dealers you utilize to execute clients' transactions.

You may make up one's mind that it is reasonable for your clients to pay commission rates that are higher than the lowest commission rate available in gild to obtain sure products or services from a broker-dealer (i.e., soft dollar system). To qualify for a "safe harbor" from possible charges that you have breached your fiduciary duty past causing your clients to pay more than the lowest commission rate, you must utilise clients' brokerage commissions to pay for certain defined "brokerage or research" products and services, use such products and services in making investment decisions, make a skilful religion decision that the commissions that clients volition pay are reasonable in relation to the value of the products and services received, and disclose these arrangements.

The SEC staff has stated that, in directing orders for the purchase or sale of securities, you may aggregate or "agglomeration" orders on behalf of two or more client accounts, so long as the bunching is done for the purpose of achieving best execution, and no client is systematically advantaged or disadvantaged by the bunching. The SEC staff has as well said that, if you lot decide non to aggregate orders for customer accounts, you should disclose to your clients that you will not aggregate and the potential consequences of not aggregating orders.

If your clients impose limitations on how you will execute securities transactions on their behalf, such as by directing you lot to exclusively utilize a specific banker-dealer to execute their securities transactions, you lot have an obligation to fully disclose the effects of these limitations to the client. For case, if you negotiate volume committee discounts on bunched orders, a client that has directed you lot to use a specific broker should be informed that he/she will forego whatever do good from savings on execution costs that you might obtain for your other clients through this practice.

You should also seek to obtain the best price and execution when you lot enter into transactions for clients on a "principal" or "agency cantankerous" basis. If you lot have acted as a master for your own account by buying securities from, or selling securities to, a customer, y'all must disclose the arrangement and the conflicts of interest in this practice (in writing) and too obtain the customer's consent for each transaction prior to the time that the merchandise settles. At that place are also explicit conditions nether which y'all may cross your informational clients' transactions in securities with securities transactions of others on an agency basis (under Dominion 206(3)-2). For example, you must obtain accelerate written authorization from the customer to execute such transactions, and also provide clients with specific written disclosures. Compliance with Rule 206(3)-2 is generally not required for transactions internally crossed or effected between two or more clients you propose and for which yous receive no additional compensation (i.e., commissions or transaction-based compensation); however, full disclosure regarding this exercise should be made to your clients.

Requirements for Investment Advisers' Contracts with Clients

As a registered investment adviser, your contracts with your advisory clients must include some specific provisions (which are ready forth in Section 205 of the Advisers Act). Your advisory contracts (whether oral or written) must convey that the advisory services that you provide to the client may not be assigned by you to any other person without the prior consent of the client. With limited exceptions, contracts cannot include provisions providing for your compensation to exist based on the performance of the client's account. In addition, the SEC staff has stated that an adviser should not enter into contracts with clients, except with certain sophisticated clients, that contain terms or clauses ordinarily referred to as a "hedge clause" considering such clauses or provisions are likely to lead other clients to believe that they accept waived their rights of legal activity, whether nether the federal securities laws or common law.

Investment Directorate May exist Examined by the SEC Staff

As a registered investment adviser, your books and records are bailiwick to compliance examinations past the SEC staff (under Department 204 of the Advisers Act). The purpose of SEC examinations is to protect investors past determining whether registered firms are complying with the police, adhering to the disclosures that they have provided to their clients, and maintaining appropriate compliance programs to ensure compliance with the law. If you lot are examined, you are required to provide examiners with access to all requested informational records that you maintain (under certain weather, documents may remain private under the chaser-client privilege).

More information about examinations by the SEC and the examination process is provided in the brochure, "Examination Data for Broker-Dealers, Transfer Agents, Immigration Agencies, Investment Directorate and Investment Companies," which is bachelor on the SEC's website at http://www.sec.gov/about/offices/ocie/ocie_exambrochure.pdf.

Requirements for Investment Advisers that Vote Proxies of Clients' Securities

Equally a registered investment adviser, if you have voting authority over proxies for clients' securities, you must prefer policies and procedures reasonably designed to ensure that you: vote proxies in the all-time interests of clients; disembalm data to clients almost those policies and procedures; and describe to clients how they may obtain information about how y'all have voted their proxies (these requirements are in Rule 206(iv)-half-dozen under the Advisers Human action).

If you vote proxies on behalf of your clients, you must also retain sure records. You must continue: your proxy voting policies and procedures; the proxy statements yous received regarding your client's securities (the Rule provides some alternative arrangements); records of the votes yous bandage on behalf of your clients; records of customer requests for proxy voting information; and any documents that you lot prepared that were material to making a decision every bit to how to vote or that memorialized the basis for your decision (these requirements are described in Directorate Act Rule 204-ii(c)(2)).

Requirements for Investment Advisers that Advertise their Services

To protect investors, the SEC prohibits certain types of advertising practices by advisers. An "ad" includes any communication addressed to more than one person that offers any investment advisory service with regard to securities (under "the Advertising Rule" — Rule 206(4)-1). An advertisement could include both a written publication (such as a website, newsletter or marketing brochure) equally well as oral communications (such equally an announcement made on radio or television).

Advertising must not be simulated or misleading and must non comprise any untrue argument of a material fact. Advertisement, like all statements fabricated to advisory clients and prospective clients, is subject to the general prohibition on fraud (Department 206 also every bit other anti-fraud provisions under the federal securities laws). Specifically prohibited are: testimonials; the use of by specific recommendations that were profitable, unless the adviser includes a list of all recommendations fabricated during the past year; a representation that whatever graph, chart, or formula can in and of itself be used to determine which securities to buy or sell; and advertisements stating that whatsoever report, analysis, or service is free, unless it really is gratuitous.

The SEC staff has said that, if you lot advertise your past investment performance record, you should disembalm all cloth facts necessary to avert any unwarranted inference. For instance, SEC staff has indicated that it may view performance data to be misleading if it:

does not disclose prominently that the results portrayed relate only to a select grouping of the adviser'south clients, the basis on which the selection was made, and the result of this do on the results portrayed, if material;
does not disembalm the effect of material market or economic conditions on the results portrayed (due east.g., an ad stating that the accounts of the adviser's clients appreciated in value 25% without disclosing that the market place generally appreciated 40% during the same period);
does not reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses that accounts would accept or really paid;
does not disclose whether and to what extent the results portrayed reverberate the reinvestment of dividends and other earnings;
suggests or makes claims about the potential for profit without as well disclosing the possibility of loss;
compares model or actual results to an index without disclosing all material facts relevant to the comparing (e.1000., an advertisement that compares model results to an index without disclosing that the volatility of the index is materially different from that of the model portfolio); and
does non disclose any material atmospheric condition, objectives, or investment strategies used to obtain the results portrayed (e.g., the model portfolio contains disinterestedness stocks that are managed with a view towards capital appreciation).

In addition, equally a registered adviser, you may not imply that the SEC or another bureau has sponsored, recommended or approved y'all, based upon your registration (under Section 208 of the Advisers Act). Yous should non use the term "registered investment adviser" unless yous are registered, and you should not employ this term to imply that as a registered adviser, you have a level of professional competence, didactics or special training. For example, the SEC staff has stated that advisers should not use the term "RIA" after a person's name considering using initials afterwards a name unremarkably indicates a degree or a licensed professional position for which there are sure qualifications; however, at that place are no federal qualifications for becoming an SEC-registered adviser.

Requirements for Investment Advisers that Pay Others to Solicit New Clients

Registered investment directorate may pay cash compensation to others to seek out new clients on their behalf, commonly chosen "solicitors" or "finders," if they run across certain weather (under Rule 206(4)-iii of the Directorate Human action):

The solicitor is non subject area to certain disciplinary actions.
The fee is paid pursuant to a written agreement to which yous are a party and (with express exceptions) the agreement must: describe the solicitor's activities and compensation arrangement; require that the solicitor perform the duties you assign and in compliance with the Directorate Act; require the solicitor to provide clients with a current copy of your disclosure document; and, if seeking clients for personalized advisory services, crave the solicitor to provide clients with a split written disclosure document containing specific information.
Yous receive from the solicited client, prior to or at the time you lot enter into an agreement, a signed and dated notice confirming that he/she was provided with your disclosure document and, if required, the solicitor'due south disclosure document.
You take a reasonable ground for believing that the solicitor has complied with the terms of your understanding.

Requirements for Investment Advisers that take Custody or Possession of Clients' Funds or Securities

Registered investment directorate that take "custody" or "possession" of customer assets must take specific measures to protect client avails from loss or theft (under "the Custody Dominion" — Rule 206(4)-2 under the Advisers Human action).

The outset step is to determine whether y'all have custody or possession of client assets. "Custody" is defined every bit "holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them." This includes situations in which you:

have physical possession of client funds or securities, even temporarily;
enter into arrangements (including a general ability of chaser) authorizing y'all to withdraw funds or securities from the client's business relationship (note that if you are authorized to deduct your informational fees or other expenses direct from clients' accounts, you lot have custody); and
serve in a capacity that gives you lot or a supervised person legal buying or access to client funds or securities (note that if you are a general partner to a privately-offered pooled investment vehicle, you lot have custody).
If you are a trustee, you may have custody.

If yous have custody, with limited exceptions, you must maintain these client funds and securities at a "qualified custodian." More often than not, qualified custodians include nigh banks and insured savings associations, SEC-registered broker-dealers, Commodity Commutation Act-registered futures committee merchants, and certain foreign fiscal institutions. With a express exception, for client accounts over which you have custody, you must have a reasonable footing, after due enquiry, for believing that the customer (or a designated representative) receives periodic reports directly from the custodian that contain specific information with respect to the funds and securities in custody. With respect to pooled investment vehicles over which y'all have custody, the qualified custodian must send account statements for the pooled vehicle directly to each investor.

If yous take custody of client funds or securities that are held at an unrelated, independent qualified custodian, then you must have a "surprise verification" past an independent public accountant. The independent public accountant must verify the funds and securities in your custody or possession at least once each calendar year, and must then promptly file a "certificate of bookkeeping" with Form ADV-E electronically through IARD.⁴

If you have custody of client funds or securities that y'all or a related person maintains as a qualified custodian, so yous must also have an internal control report completed by an independent public accountant registered with, and subject to regular inspection by, the Public Visitor Accounting Oversight Lath.

Staff answers to frequently asked questions regarding the custody rule may be found at http://www.sec.gov/divisions/investment/custody_faq_030510.htm.

Requirements for Investment Directorate to Disclose Certain Financial and Disciplinary Information

Registered investment directorate may be required to disclose sure fiscal and disciplinary data (under Rule 206(4)-4 under the Directorate Human activity). These requirements are described below.

Registered advisers that take custody or discretionary say-so over client funds or securities, or that crave prepayment six months or more than in advance of more than $1,200 in advisory fees, must promptly disembalm to clients and whatever prospective clients any fiscal weather that are reasonably likely to impair their power to meet their contractual commitments to their clients.

All registered advisers must also promptly disembalm whatever legal or disciplinary events that would be fabric to a client's or a prospective client's evaluation of the adviser's integrity or its power to run across its commitments to clients (regardless of whether the adviser has custody or requires prepayment of fees). The types of legal and disciplinary events that may be material include:

Criminal or civil actions, where the adviser or a management person of the adviser was convicted, pleaded guilty or "no competition," or was subject to certain disciplinary actions with respect to carry involving investment-related businesses, statutes, regulations, or activities; fraud, false statements, or omissions; wrongful taking of property; or blackmail, forgery, counterfeiting, or extortion.
Administrative proceedings before the SEC, other federal regulatory agencies, or whatsoever state agency where the adviser'south or a management person's activities were establish to take caused an investment-related business concern to lose its dominance to do business or where such person was involved in a violation of an investment-related statute or regulation and was the bailiwick of specific disciplinary deportment taken past the agency.
Self-regulatory organization (SRO) proceedings in which the adviser or a management person was plant to have acquired an investment-related business to lose its dominance to exercise business; or was found to take been involved in a violation of the SRO's rules and was the field of study of specific disciplinary actions taken by the arrangement.

Informational Resources Available From the SEC

The SEC provides a great deal of helpful information almost the compliance obligations of investment advisers on the SEC's website at https://www.sec.gov/investment. This information includes links to relevant laws and rules, staff guidance and studies, enforcement cases, and staff no-action and interpretive messages (more often than not from 2001 — present). In addition, the SEC's website contains a list of the source materials that were used in preparing this data sail.

To help chief compliance officers of investment advisers and investment companies in meeting their compliance responsibilities and to help enhance compliance in the securities industry, the SEC has established the "CCOutreach Program." This program includes regional and national seminars on compliance problems of concern to CCOs. Information about CCOutreach and whatsoever scheduled events is available at http://edgarfeed.sec.gov/info/complianceoutreach.htm.

Finally, the SEC staff regularly receive calls and correspondence concerning the application of the federal securities laws, and advisers and other registrants are encouraged to communicate whatsoever questions or problems to SEC staff. To ensure that yous reach the right person at the SEC, the SEC'south website lists the names and contact information for SEC staff in the Division of Investment Management who are responsible for responding to communication from the public about specific topics (https://www.sec.gov/investment/contact/divisions-investment-imcontacthtm.html). With respect to issues or questions that arise in the context of a compliance examination by the SEC, advisers are encouraged to heighten any questions or issues directly with the SEC exam team, or with test supervisors in their local SEC office (contact information for senior examination staff is available at http://www.sec.gov/nearly/offices/ocie/ocie_org.htm).

Additional Information: Reference Materials

The following informational sources may exist helpful.

Investment Advisers Are Fiduciaries

Section 206 of the Advisers Act.
SEC 5. Upper-case letter Gains Research Bureau, Inc., 375 U.Southward. 180 (1963), available on the SEC'southward website at http://world wide web.sec.gov/about/offices/ocie/iainfo/capitalgains1963.pdf.
In re Arleen W. Hughes, Release No. 34-4048 (Feb 18, 1948), bachelor on the SEC's website at http://www.sec.gov/litigation/opinions/2007/ia-4048.pdf.

Investment Advisers Must Have Compliance Programs

Rule 206(4)-vii nether the Directorate Human action.
Compliance Programs of Investment Companies and Investment Directorate, Advisers Act Release No. 2204 (Dec. 17, 2003), bachelor on the SEC'due south website at http://www.sec.gov/rules/last/ia-2204.htm.

Investment Advisers Are Required to Set up Certain Reports and to File Certain Reports with the SEC

Form ADV (Function 1A and Part 2), instructions to the Form, and filing requirements contained Rule 204-one under the Advisers Act.
A listing of the amendments that advisers must make to their Form ADV is in the General Instructions to Course ADV (Item 4) at http://www.sec.gov/pdf/fadvpo.pdf.
SEC staff's responses to frequently asked questions regarding completing and filing Grade ADV are available on the SEC'southward website at http://www.sec.gov/divisions/investment/iard/iardfaq.shtml.
Additional information regarding Form 13F and an official listing of securities that fall under Department xiii(f) of the Securities Commutation Human action are on the SEC's website at https://www.sec.gov/pdf/form13f.pdf.

Investment Advisers Must Provide Clients and Prospective Clients with a Written Disclosure Statement

Rule 204-3 nether the Advisers Act.
Apply Of Electronic Media By Broker-Dealers, Transfer Agents, and Investment Advisers for Delivery of Information; Additional Examples Under The Securities Act Of 1933, Securities Exchange Act Of 1934, And Investment Company Human activity, Directorate Act Release No. 1562 (May 9, 1996), available on the SEC'due south website at http://www.sec.gov/rules/interp/33-7288.txt.

Investment Advisers Must Have a Code of Ethics Governing Their Employees and Enforce Certain Insider Trading Procedures

Section 204A and Rule 204A-1 of the Directorate Human activity.
Investment Adviser Codes of Ideals, Advisers Deed Release No. 2256 (July 2, 2004), bachelor on the SEC'south website at http://world wide web.sec.gov/rules/concluding/ia-2256.htm.
SEC staff no-action letter, Kleinwort Benson Investment Management Limited (pub. avail. Dec. 15, 1993), available on the SEC'south website at http://www.sec.gov/divisions/investment/noaction/kleinwort121593.htm.
SEC staff no-action letter of the alphabet, Corinne Due east. Wood (Herbert-Simon Co.) (pub. avail. April 17, 1986), available on the SEC's website at http://www.sec.gov/divisions/investment/noaction/herbert-simon031886.htm.

Investment Directorate are Required to Maintain Sure Books and Records

Dominion 204-ii under the Advisers Human activity and Regulation S-P, privacy rules promulgated nether Section 504 of the Gramm-Leach-Bliley Deed.
Privacy of Consumer Financial Information (Regulation Due south-P), Advisers Human activity Release No. 1883 (June 22, 2000), which is available on the SEC's website at http://www.sec.gov/rules/final/34-42974.htm.
Electronic Recordkeeping by Investment Companies and Investment Advisers, Advisers Act Release No. 1945 (May 24, 2001), which is available on the SEC�southward website at http://www.sec.gov/rules/final/ic-24991.htm.

Investment Directorate Must Seek to Obtain the Best Toll and Execution for Their Clients' Securities Transactions

Section 206 of the Advisers Human activity.
Interpretive Release Concerning Telescopic of Section 28(e) of the Securities Exchange Human activity of 1934 and Related Matters, Commutation Deed Release No. 23170 (Apr. 23, 1986), available on the SEC'south website at http://world wide web.sec.gov/rules/interp/34-23170.pdf.
Interpretation of Department 206(iii) of the Investment Advisers Deed of 1940, Advisers Human activity Release No. 1732 (July 17, 1998), available on the SEC's website at http://www.sec.gov/rules/interp/ia-1732.htm.
Commission Guidance Regarding Client Committee Practices Under Department 28(e) of the Securities Substitution Act of 1934, Exchange Human action Release No. 54165 (July eighteen, 2006), available on the SEC'due south website at http://www.sec.gov/rules/interp/2006/34-54165.pdf.
In re Thompson and McKinnon, Exchange Human activity Release No. 8310 (May 8, 1968), available on the SEC's website at http://www.sec.gov/litigation/opinions/34-8310.pdf.
In re Mark Bailey and Co., Directorate Act Release No. 1105 (February. 24, 1988), bachelor on the SEC's website at http://www.sec.gov/litigation/admin/ia-1105.pdf.
In re Kingsley, Jennison, McNulty & Morse, Inc., Advisers Act Release No. 1396 (Dec. 23, 1993), available on the SEC'southward website at http://www.sec.gov/litigation/opinions/ia-1396.pdf.
In re Marvin & Palmer Associates, Inc., Advisers Act Release No. 1841 (Sept. xxx, 1999), available on the SEC's website at http://www.sec.gov/litigation/admin/ia-1841.htm.
SEC staff no-action letter, United Missouri Banking company of Kansas City, N.A. (pub. avail. May 11, 1990), available on the SEC's website at http://www.sec.gov/investment/noaction/unitedmissouribank012395.htm.
SEC staff no-action letter of the alphabet, SMC Capital, Inc. (pub. avail. Sept. 5, 1995), available on the SEC'south website at http://www.sec.gov/divisions/investment/noaction/smccapital090595.htm.
SEC staff no-action letter of the alphabet, Pretzel & Stouffer (Dec. 1, 1995), available on the SEC'due south website at http://world wide web.sec.gov/divisions/investment/noaction/pretzelstouffer120195.htm.

Requirements for Investment Advisers' Contracts with Clients

Section 205 of the Directorate Deed.
SEC staff no-action letter of the alphabet, Auchincloss & Lawrence, Inc. (pub. avail. Feb. 8, 1974) available on the SEC's website at http://www.sec.gov/divisions/investment/noaction/auchincloss010874.htm.
SEC staff no-action letter, Heitman Capital Management LLC (pub. avail. Feb. 12, 2007), available on the SEC'due south website at http://www.sec.gov/divisions/investment/noaction/2007/heitman021207.pdf.

Investment Advisers May be Examined by the SEC Staff

Department 204 of the Advisers Human action.

Requirements for Investment Advisers that Vote Proxies of Clients' Securities

Dominion 206(four)-6 and Rule 204-ii(c)(2) nether the Directorate Human action.
Proxy Voting by Investment Advisers, Advisers Act Release No. 2106 (January. 31, 2003), available on the SEC'due south website at http://world wide web.sec.gov/rules/final/ia-2106.htm.

Requirements for Investment Advisers that Advertise their Services

Department 206 and Dominion 206(4)-one under the Advisers Act.
SEC staff no-action alphabetic character, Clover Capital Management, Inc. (pub. avail. October. 28, 1986), bachelor on the SEC's website at http://www.sec.gov/divisions/investment/noaction/clovercapital102886.htm.
SEC staff no-action alphabetic character, Investment Company Institute, (pub. avail. Sept. 23, 1988), available on the SEC's website at http://world wide web.sec.gov/divisions/investment/noaction/ici092388.htm.
SEC staff no-action letter, Mandell Financial Group. (pub. avail. May 21, 1997), available on the SEC's website at http://www.sec.gov/divisions/investment/noaction/mandell052197.htm.

Requirements for Investment Advisers that Pay Others Cash to Solicit New Clients

Rule 206(four)-iii of the Advisers Deed.

Requirements for Investment Advisers that have Custody or Possession of Clients' Funds or Securities

Rule 206(4)-ii under the Advisers Act.
Staff Responses to Questions about the Custody Dominion at http://world wide web.sec.gov/divisions/investment/custody_faq_030510.htm
Custody of Funds or Securities of Clients by Investment Directorate, Advisers Human action Release No. 2986 (December. 30, 2009), available on the SEC's website at http://www.sec.gov/rules/final/2009/ia-2968.pdf.
SEC staff no-action letter, Investment Adviser Association, (pub. avail. Sept. 20, 2007), bachelor on the SEC�s website at http://www.sec.gov/divisions/investment/noaction/2007/iaa092007.pdf.

Requirements for Investment Advisers to Disclose Certain Financial and Disciplinary Information

Rule 206(4)-4 nether the Directorate Act.

^ane The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any publication or statement by any of its employees. The views expressed herein are those of the staff and do not necessarily reflect the views of the Committee or the other staff members of the SEC.

ⁱⁱ This information sheet contains descriptions of the Directorate Act, rules, Commission releases, courtroom decisions, Commission orders and opinions, which impose or explain legal obligations. It also contains staff interpretations and no-activity letters that have been issued past the Division of Investment Management. Staff interpretations and no-action letters provide breezy interpretative and informational help and correspond the views of persons who are continuously working with the provisions of the Directorate Act. Opinions expressed past the staff, however, are not an official expression of the Commission'southward views and they do not take the force of law. You may wish to speak with an attorney or a compliance professional about specific provisions and how they apply to your firm. This information is current as of June 2007.

³ A consummate report contains: the title and type of security; the exchange ticker symbol or CUSIP number; the number of shares, and principal amount of the security; the name of any broker, dealer or depository financial institution where the access person has an account that holds securities for the access person's direct or indirect do good; and the date the access person submits the study.

⁴ There are exceptions to this requirement. For instance, an adviser is not required to provide regular account statements with respect to a registered investment company or a limited partnership (or another type of pooled investment vehicle) that is subject to an audit at to the lowest degree annually and that distributes its audited financial statements prepared in accordance with more often than not accepted accounting principles (GAAP) to all investors, generally within 120 days of the stop of its fiscal year (under Rule 206(four)-ii).

http://world wide web.sec.gov/divisions/investment/advoverview.htm