Alert ID: 011   01/08/03
Suggested Routing:
Continuing Education
Legal & Compliance
Operations
Registration  		Registered Representatives
Senior Management
Training
  
Investment Advisors - Annual Compliance Assessment

As the new year begins, MGL would like to take this opportunity to encourage each of its Investment Advisory clients to take a few minutes and run through this short IA - Annual Compliance Assessment. To complete this assessment, simply check off each item which you have completed 2003.

Annual Offer of Form ADV. To comply with Investment Advisors Act Rule 204(4)-3 (the "Brochure Rule") and to the extent you are not a federally regulated advisor, most states also require action of the advisor which is consistent with the Brochure Rule. In any event, the Brochure Rule requires all advisors to annually, and without charge, either deliver a written disclosure statement to its existing advisory clients or to offer, in writing, to deliver the statement upon written request from the client.

Personal Trading. SEC Rule 204-2 (12) requires that advisers maintain a record of every transaction in a security in which the investment adviser or any investment advisory representative of such investment adviser, or by reason of such transaction acquires, any direct or indirect beneficial ownership. Personal securities transactions must be reported to the advisory firm not more than 10 days after the end of the calendar quarter in which the transaction was effected.

Written Supervisory Procedures. SEC Rule 204 states that every investment adviser subject to section shall establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of such investment adviser's business, to prevent the misuse in violation of the Investment Advisors Act of 1940 or the Securities Exchange Act of 1934, or the rules or regulations thereunder, of material, nonpublic information by such investment adviser or any person associated with such investment adviser. As part of an advisor's annual review of their business activities, advisors are encouraged to review their written supervisory procedures to ensure that they properly address the firm's business activities and comply with the provisions of Rule 204.

Billing Procedures - Custody Requirements. SEC Rule 206(4)-2 requires that advisers comply with the custody provisions of the Rule, unless it complies with the following procedure:

A. The advisory client provides a written authorization permitting the adviser's advisory fees to be paid directly from the client's account held by an independent custodian or trustee;

B. The Adviser shall send the bill to the client and the custodian or trustee at the same time a bill showing the amount of the fee, the value of the client's assets on which the fee was based, and the specific manner in which the adviser's fee was calculated; and

C. The custodian or trustee agrees to send to the client a statement, at least quarterly, indicating all amounts disbursed from the account, including the amount of advisory fees paid directly to the adviser.

Form ADV Update. All SEC-registered advisers are required to file an Annual Updating Amendment to their Form ADV within 90 days of the end of their fiscal year. Accordingly, as advisors are encouraged to review their business activities to ensure that Parts I and II contain all requisite disclosures and address each aspect of their firm's business.

 Privacy Policy. Reg S-P requires that all broker-dealers, investment advisers and investment companies: (i) have policies and procedures in place to protect client records and information; (ii) deliver initial privacy notices to all existing and new customers; and (iii) deliver privacy notices on an annual basis thereafter. All investment advisors are encouraged to provide their customers with a copy of their Privacy Notice together with their Annual Office of their Form ADV.

 Record Retention. Rule 204-2 under the Advisers Act identifies the books and records that are required to be made and kept. Paragraph (e) of this rule states that certain of these books and records must be "maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on records, the first two years in an appropriate office of the investment adviser." Accordingly, all investment advisors are encouraged to review the requirements of Rule 204-2 or consult with your MGL relationship manager prior to destroying any records of the investment advisor.

 Performance Reporting. Rule 204-2(a)(16) under the Advisers Act requires advisers to maintain "all accounts, books, internal working papers, and any other records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return used in advertisements." Accordingly, all investment advisors are encouraged to review the requirements of Rule 204-2 or consult with your MGL relationship manager prior to destroying any records of the investment advisor.

Once you have completed the Annual Compliance Assessment, MGL can assist you with the handling of any amendments and or notice filings which may be required for your firm to be in compliance. Simply print a copy of the Annual Compliance Assessment form and fax it to Suzette M. Surman at 281-364-1452.

By taking just a few minutes to complete this simple Annual Compliance Assessment you can, help us help you, prevent common problems today which if left unattended, may result in regulatory problems for your firm in the future!
Suzette M. Surman, Vice President Investment Advisor Division 281-863-6109
  MGL Consulting Corporation
9303 New Trails Drive, Suite 400
The Woodlands, Texas 77381
Phone: 281-367-0380
Directions...Solutions...
    Unparalleled Service
Published and Copyright© 2002 MGL Consulting Corporation all rights reserved and all of the releases provided are protected by copyright
and other applicable laws, treaties, and conventions. All reproductions, other than for an individual user's reference, are prohibited without
prior written consent.
Click here to Signup