Cybersecurity & Compliance Blog

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Authors

Investment Adviser Association
Justin Kapahi
Marc Gilman
Vanessa Valerie Tay
Workplace by OS33
Written by Investment Adviser Association
on July 17, 2018

For the fifth year in a row, cybersecurity continues to be the biggest compliance concern at registered investment adviser firms – with 81 percent of survey respondents identifying cybersecurity as the “hottest” compliance topic and nearly two-thirds indicating that their firms increased compliance testing in this area over the past year.

The survey results also reflect the impact that technology is having on firms more broadly, the use of social media, tools to fight cybersecurity, and the role of automated compliance systems.

Compliance professionals at 454 investment adviser firms participated in the 2018 Investment Management Compliance Testing Survey, conducted jointly by the IAA and ACA Compliance Group. Firms of all sizes responded, with 30 percent of respondents managing less than $1 billion, 45 percent managing $1 billion to $10 billion, and 25 percent managing more than $10 billion.

Almost two-thirds (64 percent) of responding firms reported having 50 or fewer employees, which is consistent with industry data showing that the vast majority of investment advisers are small businesses. This year’s survey also revealed that the majority of CCOs (66 percent) continue to wear more than one hat (with 20 percent also serving in some legal capacity).

“Now in its 13th year, the survey continues to be an invaluable resource for compliance professionals for identifying compliance trends and benchmarking their practices against other firms in the industry. Among the many key takeaways of this year’s survey is that the job of a CCO is becoming more complex and varied, as demonstrated by the wide range of legal and compliance areas CCOs are responsible for, with new ones being added every year,” said IAA President & CEO Karen Barr.

Compliance professionals ranked issues relating to the SEC’s Advertising Rule as the second hottest compliance topic (29 percent) after cybersecurity – not surprising, given the SEC’s recent focus in this area. This includes concerns raised by the SEC staff in a published Risk Alert regarding the most commonly cited Advertising Rule deficiencies in examinations and the agency’s consideration of potential amendments to the Advertising Rule.

Other areas of concern identified by respondents were issues relating to custody, with 28 percent of survey respondents identifying it as the third hottest topic and many expressing concerns with custody-related disclosures in Form ADV. Issues relating to privacy rounded out the top four compliance concerns. The 2018 survey, conducted online through May, covered a wide range of topics.

Notable findings

  • Cybersecurity continued to be the hottest compliance topic for 2018                (81 percent) for the fifth year in a row
  • Over 77 percent of firms have not decreased compliance testing; most significant increase is in cybersecurity
  • Close to 70 percent use some form of technology in their compliance program: most common usage is for guidelines, gifts, code of ethics; over half believe in increase in technology is coming

Download the IAA Newsletter here for the full survey findings.

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