Thus far, our review of the necessary components of your compliance program has focused on discrete areas. This post focuses on another equally important aspect of your compliance program that touches all of those other areas; ensuring the accuracy of your disclosures. After all, what’s the point of putting in all of the hours to build a robust compliance program only to raise the ire of a regulator or a client because of inaccurate or leading disclosure?
At first, this may seem intuitive. You may say, for example, of course if we change a product or service we offer we will update our compliance program accordingly. In practice, however, this may be a case of easier said than done. Especially in the context of a robo-advisory firm, things tend to move quickly, and your firm needs to ensure that your compliance program changes just as quickly when needed.
When setting up your firm’s compliance procedures for ensuring accurate disclosure, the first step is to identify the areas or items necessary for review. This should include all marketing materials, your firm’s website (including any client intake documents or portals), its social media accounts, client account statements, and your firm’s Form ADV (including any brochures).
Once you have identified all areas for review, the next step is to establish a reviewer and a consistent and appropriate review period. Your firm’s Chief Compliance Officer (“CCO”) should be the individual tasked in your compliance program with oversight of the periodic review of all necessary materials to ensure accuracy of disclosure. The CCO should ensure that the review is done and may be involved in each review, but it is equally important that a qualified expert review the materials. The next question is timing of review. Regular and periodic review is key. But the timing of review may change depending on the item in question. For example, a quarterly investor letter should obviously be reviewed quarterly prior to being distributed. But perhaps your procedures call for a monthly review of the accuracy of your website disclosure. Marketing materials require ad hoc review whenever a new piece is produced. Other items are tied specifically to regulatory timelines, for example, material inaccuracies in your brochure must be updated promptly. Your compliance review schedule must account for all of these timelines.
Training is also an important component of accurate disclosure review. Your firm may establish a strong compliance review program effectively executed by the CCO, but unless other employees know certain items, such as marketing materials, need to be reviewed before a new piece is issued potential problems can occur. This may be especially important in the case of your firm launching a new product or service. Your firm’s product development team is rightfully focused on bring new services to the market, and without proper involvement from your compliance team, may not fully contemplate potential regulatory pitfalls. Regular training to involve your firm’s CCO in these types of situations can save your firm from headaches down the road. As you can see, with many moving parts and different time periods, it’s important to establish a strong infrastructure for your compliance procedures to ensure there are no gaps in the timing or consistency of your review.
Next time, we’ll continue our compliance 101 thread when Marc discusses safeguarding client assets from conversion or inappropriate use by advisory personnel. As always, thank you for your continued readership!