2021 Compliance Testing Survey: New SEC Marketing Rule Now Top Compliance Concern

New SEC Marketing Rule now top compliance concern. Most firms report effective business continuity plans related to COVID-19.

Implementing the SEC’s new Marketing Rule for Investment Advisers is the number one worry for investment adviser compliance officers, according to the 2021 Investment Adviser Compliance Testing Survey. Advisory firms have until November 4, 2022 to come into full compliance with the rule.

Advertising/Marketing was identified by 58 percent of survey respondents as the “hottest” compliance topic – up 33 percentage points from last year. Cybersecurity followed with 53 percent. Now that it’s become a top priority for the SEC, Climate Change/ESG climbed to third in compliance officers’ list of hot topics, named by 45 percent of respondents (up from 14 percent last year). Rounding out the five hottest topics were COVID-specific Business and Continuity Plan concerns (17 percent) and Digital Assets (17 percent).

Now in its 16th year, the Investment Adviser 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 practices and strategies investment adviser firms are using to address core compliance topics.

The brightest spot in the survey findings regarded the Impact of COVID-19. While the pandemic continues to disrupt businesses, and firms have had to address a host of new concerns and issues related to their risk assessments and compliance programs, the industry by and large appears to be passing the test. No survey respondents reported material compliance violations as a result of the BCP/pandemic – evidence of strong compliance programs and effective business continuity plans.

The vast majority of firms (82 percent) reported no increase in personal trading violations. With respect to the breakdown of employees teleworking, a majority of firms had all personnel working from home (62 percent). Other firms reported having only certain employees teleworking (37 percent). About a third of firms (35%) reported having the office temporarily closed.

For the first time, this year’s survey asked compliance officers to rank their priorities for regulatory and legislative action affecting investment advisers. The most frequently named were:

1. Unified, Federal Data Privacy and Cybersecurity Laws
2. Sustainable Investing (ESG)
3. Custody Rule
4. Electronic Delivery
5. Form CRS
6. Proxy Voting

Full results of the 2021 Investment Management Compliance Testing Survey are available for download here.

About the Survey Respondents

Compliance professionals at 350 investment adviser firms participated in the Survey. All firm sizes were represented – with 28 percent of respondents managing less than $1 billion in assets, 39 percent managing $1 billion to $10 billion, and 33 percent managing more than $10 billion. Nearly half (49 percent) of responding firms reported having between 11 and 50 employees, which is consistent with industry data showing that the vast majority of investment advisers are small- to mid-sized businesses.

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 (42 percent of respondents), private funds (50 percent), ERISA assets/pension consultants (49 percent), institutional clients (68 percent), and high net worth individuals (67 percent).

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 $25 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. We empower our clients to reimagine GRC and protect and grow their business. Our innovative approach integrates consulting, managed services, and our ComplianceAlpha^® technology platform with the specialized expertise of former regulators and practitioners and our deep understanding of the global regulatory landscape. Our global team of regulatory compliance professionals includes former SEC, FINRA, FCA, CFTC, NFA, and state regulators, as well as former senior managers from prominent financial institutions and advisory firms. We work with compliance and legal professionals to review and develop compliance programs based on best practices, current regulatory requirements, and robust oversight processes. www.acaglobal.com  

About Yuter Compliance Consulting

Amy Yuter is the Managing Principal of Yuter Compliance Consulting. Amy has over 25 years of industry and SEC regulatory experience in securities law compliance. Her responsibilities have included oversight of investment advisers, investment companies, transfer agents, broker-dealers, and private funds. Amy previously served as a Director of the National Society of Compliance Professionals, has participated as a member of various committees at the Investment Adviser Association and the Investment Company Institute and founded the Philadelphia Compliance Roundtable and the Investment Management Compliance Testing Survey.

For Press Inquiries

At the IAA, please contact Herb Perone

At ACA Group, please contact Krissy Kennedy