State securities regulators say investment advisers are slipping back into some bad habits. They found 3,542 problems in an examination of 825 advisers from January through June, or 4.3 deficiencies per adviser, according to a new report from the North American Securities Administrators Association Inc.
That's a slight but nevertheless significant increase over the same time a year earlier, when examiners found 4.1 problems per adviser.
The problems include unethical business practices such as signing blank documents, inadequate supervision of trades and misusing the term "RIA" in advertising, correspondence and on business cards and letterhead.
The problem with the term, which stands for "registered investment advisor," is that it sounds like a credential that's awarded to an adviser after he or she undergoes rigorous training and perhaps passes an exam of some kind.
In fact, it's a term that applies to firms, not individual advisers, said Mike Huggs, director of the Mississippi Securities Division and chair of NASAA's IA Operations Project Group.
“A firm is an RIA; a person is not an RIA,” he said. “When you sign a letter that way, it implies it is a designation that's earned, and it is not.”
Other problems included inconsistencies and outdated information provided by investment advisers in annual disclosure documents. The most common books-and-records violations included failing to keep client suitability information, and not keeping client records and data safe, according to Investment News, a trade journal.
The deficiencies uncovered by securities regulators from 45 states this year led NASAA to update its compliance guidelines recommending that advisers review their disclosure documents annually, carefully maintain records, including electronic backups, and other best practices.
