SUGGESTED COMPLIANCE FILES AND REPORTS The following is a list of suggested files and reports that may be requested by a regulator during an examination or investigation. This list of suggested files and reports has been provided to help you set-up your compliance filing and reporting systems. This may not be a complete list and RIA Compliance Consultants does not make any guarantees that it will contain all required records. It is intended to be a guide to many of the standard files that most investment advisors will need. You should familiarize yourself with the SEC or applicable state books and records requirements in order to ensure that you are maintaining all required books and records. In addition to files required by SEC or state rules, there are many files a regulator may require during an examination. Keep in mind that generally, books and records must be kept in an easily accessible location for a period of five years from the end of the fiscal year in which an entry was made or published. For the first two years, books and records must be maintained in an appropriate office location of the firm. Organizational Documents - Articles of Incorporation and/or By-Laws - Corporate Minute Book - LLC/Partnership Agreements & Amendments - Stock Certificate Book - Company Organizational Chart - A schedule or chart of all affiliated or related entities A list of all current employees with date of employment and current position held A list of all employees that were employed in past five years showing date of termination A list of all current access persons showing the date each individual became an access person A list of all access persons for the past five years showing the date the individual became an access person and the date the access person status terminated A list of all individuals providing investment advice to clients on behalf of the advisor (investment advisor representatives-iars) Financial Records - Financial statements. - A copy of Adviser's general ledger chart of accounts. - A copy of the trial balances underlying the financial statements. - General ledgers and any subsidiary ledgers that form the basis of the financial statements. - General, cash receipts, cash disbursements and any other journals that form the basis of the ledgers. - All bank statements, checks, deposit slips, check registers and reconciliation records - All loan agreements and notes payable. - All notes receivable. - All bills and statements, paid or unpaid, presented to or issued by Adviser. - Internal audit work papers 1
- The names and addresses of Adviser's current auditor or accountant and Adviser's legal counsel. Advertising- - A copy of any promotional brochures, pamphlets, or other materials routinely furnished to prospective clients - A copy of any advertisements (e.g., newspaper or magazine ads, radio scripts) used to inform or solicit clients - A copy of any newspaper or magazine article reprints disseminated to clients or prospective clients - Newsletters - Seminars - Performance Information - Business Cards - Letterhead - Phone book (yellow or white page) ads - Performance advertising back-up documentation Contracts/Agreements - Client Agreements - In-Use - Client Agreements - Previous Versions - Solicitor Agreements - Sub-Advisor Agreements - Consultants - Outside Service Venders - Request for Proposals (RFPs) Form ADV - Current ADV Part 1 including all applicable schedules (Maintained in IARD system. Hard copy not required but must make sure you know how to access the current ADV Part 1.) - Historical copies of ADV Part 1 including all applicable schedules (Historical Records of ADV Part 1 are maintained in the IARD System. You do not need to maintain separate hard copies of these but you must make sure you know how to access previous copies.) - Back-up documentation for numbers reported on ADV Part 1, especially for amount of assets under management reported with each annual amendment. - Current ADV Part 2 - Historical ADV Part IIs & Schedule F - Form ADV Part 2-Appendix 1-Wrap-fee brochures (if applicable) - Historical Schedule H-Wrap-fee brochures (if applicable) - Alternative Disclosure Document: Previous Versions (if applicable) - A Dated Copy of the Annual Offer Letters of Form ADV Part 2(or wrapfee brochure)- Additionally, a list of all clients the offer was sent to and a log of all clients that requested a copy of the Form ADV Part 2(or wrapfee brochure). At a minimum, the log should include who made the request, the date the request was received and the date the document was sent to the client. Licensing/Registration - A separate file for each investment advisor representative - A copy of a current originally signed Form U4 for each licensed individual 2
- Copies of all renewal and initial registration forms filed for the investment advisor, each investment advisor representative (IAR) and/or solicitor. - A list of all states that the firm is licensed/notice filed in - A list of all IARs indicating which state(s) they are licensed to conduct business in Client Related Files/Reports - List of all current clients (at a minimum list should include name, custodian, type of account [e.g., equity, balanced, fixed], whether or not advisor has discretionary authority and the current balance of each client s asset under management with a total amount of assets under management shown on the report) - List of all new clients during 12 month period (list should indicate inception dates and the identity of any third party consultant instrumental in advisor obtaining a particular account) - List of all clients lost during 12 month period (list should indicate date relationship was terminated and reason why client terminated relationship) - List of discretionary clients - List of non-discretionary clients - List of clients financial planning services were provided to during 12 month period - List of wrap fee clients - List of clients the advisor is receiving a solicitor/referral fee on (list should indicate who is paying fee to advisor) - List of clients advisor is a sub-advisor to - Copies of all current standard advisory agreements used with clients - Copies of all past/revised standard advisory agreements used with clients - Standard fee schedules - List of all clients with client directed brokerage arrangements showing broker/dealer maintaining account and client reason for directing brokerage (if known) - Do Not Call File - Analyst Reports - Investment Committee Minutes (if applicable) Solicitors - List of all parties to whom a cash referral fee was paid - List of all clients that the advisor is paying a solicitor fee on - Copies of all solicitor agreements - Copies of all signed client disclosure documents (can be maintained in client files) Individual Client Files - Executed Agreement for Services and Fee Schedule - New account forms and any additional documents gathered to establish and account and determine suitability - Additional paperwork (e.g., trust documentation, estate paperwork) - Written acknowledgement of receipt of Form ADV Part II & Sch F or a similar disclosure document - Written grant of trading and discretionary authority - Investment Guidelines/Restrictions - Reports (performance or position) 3
- Correspondence (includes email and instant messaging communications)* - Statements* - Confirms* - Fee invoices - Proxy Voting Reports - Written instructions for client directed brokerage (Directed Brokerage Letter) *Can be maintained separate from the individual client file Privacy Policy - A dated copy of the firms privacy policy - A copy of any previous privacy policies - A log of all clients the privacy policy was sent to for the 12 month period - A list of clients that executed the Opt-Out provision of the policy (if sharing client information) A list of all approved broker/dealers Code of Ethics - A copy of the firm s current Code of Ethics (should include Standard of Conduct and Compliance with Laws, Insider Trading Policies and Personal Securities Trading Policies, Prior Approval of IPOs and Private Placements, and Reporting Violations) - A copy of previous Codes of Ethics - A list of all supervised persons indicating the date they became a supervised person of the firm - A written acknowledgement of receipt of Code of Ethics for 12 month period - A copy of all past executed Code of Ethics (must be executed at time of employment and each time a change is made) Personal Securities Transactions - A list of all access persons (current and for the past five years indicating date individual became an access person and date access person status was terminated if applicable) - Brokerage Account Disclosure Forms - A list of all employee securities accounts - Initial and annual Holdings Reports for all access persons - Quarterly Personal Securities Transaction Reports - Transaction pre-approval documentation (if applicable) - A list(s) of all securities that were restricted from trading at anytime during the 12 month period indicating the time that trading restrictions were in place, the restrictions that were in place, and the reason for the restrictions Written Supervisory Procedures that, at a minimum, address each of the following areas as applicable: - Portfolio management processes including allocation of investment opportunities among clients and consistency of portfolios with clients investment objectives, disclosures by the advisor, and applicable regulatory restrictions; - Trading practices, including procedures by which the advisor satisfies its best execution obligation, uses client brokerage to obtain research and 4
other services ( soft dollar arrangements ), and allocated aggregated trades among client accounts; - Proprietary trading of the advisor and personal trading activities of supervised persons; - The accuracy of disclosures made to investors, clients and regulators, including account statements and advertisements; - Safeguarding of client assets from conversion or inappropriate use by advisory personnel; - The accurate creation of required records and their maintenance in a manner that secures them from unauthorized alteration or use and protects them from untimely destruction; - Marketing advisory services, including the use of solicitors; - Processes to value client holdings and assess fees based on those valuations; - Safeguards for the privacy and protection of client records and information; and - Business Continuity/Disaster Recovery Planning Complaint File Correspondence with Regulators Invoicing - A copy of all invoices sent to clients - A copy of all back-up documentations for numbers used in calculating client fees (e.g., account values, amount of assets under management) Proxy Voting - Written proxy voting policies and procedures - Copies of client disclosure and offer of copy of written policies and procedures - Copies of client disclosure of how they can obtain information from the advisor on how securities were voted - Proxy statements received for clients - Records of votes cast on behalf of clients - Records of written requests for proxy voting information and copies of written responses to such requests - Any documents prepared by the advisor that were material to making a proxy voting decision or that memorialized the basis for the decision. Trading - An order memorandum for each trade place by advisor for the purchase or sale of any security that includes: Any special instructions received by the advisor regarding the purchase, sale, receipt or delivery of a particular security Any modification or cancellation of any order or instruction The terms and conditions of the order, instruction, modification or cancellation Whether the order was solicited or unsolicited or if discretionary authority was used The person connected with the advisor that recommends the transaction to the client The person who place the order The account for which the order was entered 5
The date of entry The bank or broker/dealer through whom the order was executed Time of placing the order Time order was executed - Trade Blotter or purchase and sales journal, preferably featuring the following fields of information in chronological order. Auditors prefer the information is provided in spreadsheet format (Excel or Lotus) on diskette with a separate column for each field. Trade date Fees Buy or sell Accrued interest Number shares Net amount to/from client Security name Client name CUSIP number Client account number Price Number shares or principal amount Total commission Broker or dealer name Commission in cents per share - A trade error log or file indicating account where error took place, reason for error and details on corrective actions taken - Best execution report/documentation Securities Positions - A cross-reference, stock record, or securities position record of all client securities holdings. - A record of all securities held in client portfolio (aggregate position totals for all securities) - A record of client securities holdings by client Litigation A list of all broker/dealers, affiliated or unaffiliated, that, to the Advisor s knowledge, received order flow payments or rebates related to executing transactions for client portfolios Securities Positions Soft Dollar Arrangements - Any written agreements concerning soft dollar arrangements - Access to any separate ledgers and journals recording trading in client accounts to satisfy soft dollar commitments Best execution report Past Regulatory Deficiency Letters Section 13D, 13F, or 13G Reports (if applicable) IARD Information (if applicable) Although not a compliance file, you will need to keep track of your administrators, entitlement privileges, etc. in a central location. 6
Additional Misc. Lists and Files Needed if applicable A list of current or former clients which have or had wrap fee arrangements governing their compensation of Adviser, featuring for each the client's name, its custodian/sponsor broker-dealer, and the terms of the arrangement, including the terms of Adviser's compensation. A list of all client accounts which are directly or indirectly related to Adviser or any of its related persons, featuring the names of the accounts, their account number, and the party related to. A list of pricing services, quotation services, and externally acquired portfolio accounting systems utilized by Adviser including a description of whether such items were paid for with hard or soft dollars or combination. A list of all proprietary trading or investment accounts of Adviser. A list of affiliated broker-dealers featuring their affiliation and a description of their clearing arrangements. A list of securities which Adviser or any affiliate underwrote or with respect to which it participated in such securities' underwriting as underwriting manager or member of a purchase group (syndicate) or selling group during the period which were purchased by any client portfolios and the approximate date of such underwritings. A list of the securities in which Adviser or an affiliate was a market maker during the period. A list of principal or cross transactions which took place during the period between client and/or proprietary or affiliated accounts. A list of all securities of a public offering that were invested in by client or proprietary accounts at that offering or in the aftermarket which traded at a premium over the public offering price whenever their secondary markets began ("hot issues"). For each investment partnership, trust, and any other pooled investment vehicle formulated or offered by Adviser or its officers, directors, or employees to clients or prospective clients. On the list please indicate the following: o the general partners, trustees, or others as applicable; o whether the instruments are registered with the Commission and if not, the exemption relied upon; o names and addresses of clients invested in each partnership, trust or other pooled investment vehicle and the number of shares or units owned and the amount of money invested. For the limited partnerships, trusts and other vehicles listed above, provide copies of all offering memoranda, financial statements, and partnership & trust agreements, as applicable. Also, provide reports sent to limited partners for the last two years. For private placement limited partnerships, provide a copy of the Form D filed with the Commission. Any investment committee meeting minutes. Any correspondence with or reports from public accounting firms. Any correspondence with and questionnaires completed for any third party consultants during the period. 7