To our readers, we hope this entry to our blog finds you and your family safe and healthy. As we all begin to envision a path forward following the unprecedented events caused by the COVID-19 pandemic, a focus on compliance for your firm should not be an overlooked task.
For robo-advisers, this is an opportunity to analyze your compliance program with specific attention on policies that may have been trigged as a result of the pandemic. Given the need for social distancing and the stay-at-home restrictions imposed by many states, it is likely that your firm operated at some point, and perhaps for the entirety, of the past few months pursuant to its business continuity plan (“BCP”).
Barring some unexpected previous need, this is likely the first time that your firm had to rely on its BCP. Like all compliance polices, periodic review and testing for effectiveness is always a best practice. In essence, the last few months have served as a live test of your BCP. What makes a review of your BCP so important at this juncture is that it presents an obvious target for potential regulatory review. During your next examination, your firm should anticipate scrutiny by the SEC staff of any compliance policy likely to have been relied upon during the pandemic. In preparation for such an exam, it would be prudent to evaluate your BCP as presently drafted and compare it against the practicalities of how your business operated for the past few months while the plan was in effect. Identify and reconcile any divergences from the plan. That is, analyze how your business operated during this period and ensure that the policy and procedures laid out in your compliance program accurately and appropriately match those business operations. Additionally, your firm should also work to identify any potential gaps in your BCP. Even if your firm operated in line with its current policy, consider if there were any lessons or best practices that could be adopted to improve your compliance procedures.
Staying ahead of regulatory scrutiny involves anticipating issues before they become problems. Regular review and testing of a compliance program are critical to the success of all robo-advisory firms. If we can be of assistance in reviewing your BCP or any aspect of your compliance program, please don’t hesitate to reach out. We thank you, as always, for your continued support of the blog and hope you’ll check back soon for our next entry.