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by Bill Singer

2015 NASAA Investment Advisors Report Shows Improvement

October 6, 2015

The North American Securities Administrators Association ("NASAA") issued its biennial Investment Advisors Coordinated Examination Report, which shows a stable and somewhat improving compliance picture for state-registered Investment Advisors ("IAs") in 2015 versus the 2013 cycle. States presently oversee IAs with assets under management of less than $100 million and of the 823 reporting IAs with assets under management ("AUM"), about 72% of that population reported under $30 million in AUMs.  Notably, about 79% of reporting firms had no more than 1 or 2 IA representatives.

The 2015 Report cites these five categories as presenting the leading problems for the industry:
  1. Top books and records deficiencies: not maintaining client suitability documentation and order memorandum.
  2. Top contracts deficiencies: fees not explained and not having all contracts in writing.
  3. Top registration deficiencies: Form ADV inconsistencies between Part 1 and Part 2 and the timely filing of amendments.
  4. Top fee deficiencies: fee charged does not match contract or ADV and unreasonable or excessive charges.
  5. Top custody deficiencies: improper client invoice for direct fee deduction and dual invoicing of client and custodian for direct fee deduction.

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