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Oct 2012
09
October 09, 2012

Investment Adviser Branch/Satellite Office Supervision


Often overlooked by investment advisers are supervisory procedures for branch or satellite offices.  During a routine investment adviser examination of a Michigan registered investment adviser, the Office of Insurance and Financial Regulation (“OFIR”) criticized the investment adviser for failure to have reasonable policies and procedures tailored to all of its business. While the firm did have written supervisory procedures, they were not reasonably designed cover all of its business activities,  particularly with regard to satellite or branch office locations. While not an exhaustive list, OFIR cited the following items as needing to be included in the firm’s policies and procedures:
 
  • Documentation requirements:
    • How client files will be saved/preserved and transferred to the main office.
  • Correspondence procedures:
    • Covering hard copies and email.
    • Archiving and copying for home office review.
    • Complaint handling procedures.
  • Client meetings, how, when, and where with related documentation.
  • Branch/satellite office inspection/audit policies and procedures.
    • Specific audit steps, what records will be examined?
    • Review for unauthorized sales materials, performance reports, outside business activities.
    • Unannounced inspections and inspections by appointment (regulators request both).

The SEC likely has the same concerns with respect to branch/satellite offices of investment advisers registered with it. In various investment adviser compliance conferences, SEC speakers have pointed to FINRA’s guidance for broker-dealer branch offices as a starting point for designing investment adviser branch office supervision programs. To get started enhancing your own firm’s branch/satellite office supervisory system, see FINRA’s Regulatory Notice to Members 11-54 where FINRA and the SEC issued joint guidance on effective policies and procedures for broker-dealer branch inspections available hereContact any member of the Broker Dealer/Investment Adviser Practice Group if you need assistance with your branch office policies and procedures.

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