It’s not just Bernie Madoff and other criminals that end up in the crosshairs of compliance or regulators. The regulatory landscape is complicated and ever-changing and can pose significant challenges even for the most well-intentioned of advisors.

Here are some common unintentional violations:

1. Failure to Disclose. This encompasses a lot of different components of an advisor practice, but here are some commons areas:

a. Failure to disclose updated information on form U4.

b. Failure to disclose a new Outside Business Activity (OBA). Remember, that an OBA is not just income generating activities. It’s any position of power.  Being appointed as a trustee or holding passive ownership in a company often goes unreported.

c. Failure to disclose pricing or strategy changes. Such changes need to be reflected in your firm's ADV and, likely, your marketing materials.

Best Practice: Over disclosure is always best. Reach out to your compliance team to discuss changes to the aforementioned and they can guide you through the disclosure process.

2. Unapproved Communication Methods – ahem, it’s probably texting.

a. Make sure you are using an archive service for texting with clients that meets industry books and records requirements.

b. Remember, that texting is electronic communication. Money movement and trade orders still need to be confirmed verbally.

c. Exercise caution with messaging on social media and in virtual meeting rooms. If it’s not being archived by your firm, it’s not an approved method of communication.

Best Practice: Should a client reach out on an unapproved communication channel, screenshot the message, then transfer the conversation to a company approved channel before responding.

This is not an exhaustive list of compliance pitfalls. However, a major component of any firm’s compliance program should be regular education on topics like these.

If you don’t have a compliance team that is easily accessible for questions, ARC can help with that.