Docupace
  • PreciseFP
  • RIA Productivity Suite
  • Docupace Platform
    • Docupace Platform

      A comprehensive, customizable solution for digitizing your wealth management operation and increasing efficiency, productivity, and profit.

      Platform Overview
      jPass Login
      • Advisor Transitions

        Digital workflows make it possible to transition incoming advisors’ books of business in as little as 30 days.

      • Client Onboarding

        New account opening and maintenance is simple with automatic data synchronization and compliance checks.

      • Compensation Management

        Build financial reports with comprehensive summaries that can be created with unlimited hierarchies.

      • Compliance TRACKR

        Enable digital delivery to ensure clients receive RegBI (Form CRS), Form ADV and DOL Rule disclosures.

      • Document Management

        Store records with a secure, cloud-based document management solution and always be prepared for an audit.

      • PreciseFP

        Powerful automation, workflow, and operations management tools that enable seamless client engagement.

      • RIA Productivity Suite

        Out of the box capabilities and integrations that meet the flexibility needs & simple-delivery requirements of the RIA market.

      • Surveillance and Compliance

        Our Surveillance and Compliance solutions are the antidote to your challenges, pre- and post-trade.

  • About
    • About Us

      Docupace is a technology company built for the wealth management industry. We’ve been on a mission to eliminate paperwork since 2002.
      Who We Are

      • Partner Integrations

        The Docupace Platform integrates with leading CRMs, esignature solutions, custodians, clearing houses, and more.

      • Careers

        Want to work for an exciting, fast-growing company with excellent benefits? View our openings and apply.

      • Back Office Heroes Day

        Learn more about National Back Office Heroes Day presented by Docupace.

      • Security & Compliance

        Learn more about the initiatives that protect the Docupace Platform from cyber and regulatory risks.

      • Contact Us

        Get started with the Docupace Platform or reach out to our sales, client support, or compliance support specialists.

  • Resources
    • Resources

      Access product and solutions guides, whitepapers, success stories, datasheet, webinars, and more.

      Resource Index

      • Blog

        Stay up to date on the latest industry news and read insights from wealth management technology experts.

      • News & Events

        The latest Docupace headlines, plus information about upcoming conferences and webinars.

      • Datasheets

        Get detailed information about Docupace products, services, and partners

      • Webinars

        Discover on-demand webinars to learn about our products, services, and industry trends.

      • eLearning & Documentation

        Guides and videos to help you accomplish tasks in the Docupace system, plus release notes and glossary.

      • Whitepapers

        In-depth insights and research about the biggest topics in wealth management technology.

  • Contact Us

10 Compliance Red Flags and How to Avoid Them

By Robert McGill · Mar 9, 2023
Mar 9, 2023 · Compliance and Security

10 Compliance Red Flags and How to Avoid Them

Robert McGill, President, Compliance and Compensation Platforms | Docupace

Most firms and advisors don’t suddenly wake up and say “hey, let’s fall out of compliance today.”

After all, failure to follow SEC and FINRA rules can result in severe fines, removal from professional groups, legal issues, a negative reputation, and even criminal charges for firms.

But that doesn’t mean that firms and advisors can’t inadvertently move down the slippery slope to noncompliance. It may not be intentional, but little actions or missteps can lead to much larger issues.

Stay in compliance by watching out for these 10 red flags:

Outdated Form ADV

Form ADV is required to register as an investment advisor and collects details like the number of clients or total assets under management. As situations change and your firm grows, Form ADV may become outdated, which can lead to compliance issues with the SEC. To avoid this red flag, regularly update the form, especially as your business changes.

Lack of Compliance Training

The SEC has warned firms about a rise in inadequate compliance resources, specifically when it comes to compliance training. In many cases, the poor resources aren’t a conscious decision on the part of the organization, but get lost in the myriad of other responsibilities compliance teams have. A lack of training doesn’t mean a firm is out of compliance. It does mean, however, that it makes identifying and addressing issues more difficult.

Unclear Procedures

Even with the proper resources, many firms experience the red flag of unclear policies and procedures. According to the SEC, many firms have policies, but they don’t adequately implement recommended actions. Not following compliance checklists and processes is an example of this problem. Unclear procedures can allow tasks and documents to fall through the cracks.

Undisclosed Conflict of Interest

As a fiduciary, you are responsible for protecting your client’s best interests. That means disclosing if you have a conflict of interest, such as a personal or professional connection to an account. Conflicts may arise, but the client needs to be made aware of them as they come up. The SEC carefully monitors conflicts of interest and requires all RIAS to complete Form CRS (Client Relationship Summary). Not disclosing a conflict of interest to the SEC or clients is a major red flag.

Incomplete Commission Disclosure

Some of the most common conflicts of interest are commissions or when an advisor is paid for recommending a particular fund or product. You must inform your clients if you generate profits from certain funds sold. Avoiding that disclosure puts you at risk of noncompliance.

Unsecure Digital Files

A significant part of compliance is document storage and retention. Firms can store items in the cloud, but those systems must follow specific protocols and security measures. Many firms don’t take advantage of network storage providers’ available security features, which puts them at risk for noncompliance and exposes their clients’ information to vulnerabilities.

Not Maintaining Records

The SEC’s Books and Records rule includes an extensive list of documents, records, and communication that has to be stored, either physically or digitally, for years. Some required records include email correspondence and social media posts, which some firms don’t realize they need to maintain. Failing to follow this rule by not keeping track of the proper documents for the right amount of time can be a compliance red flag.

Skipping Onboarding Steps

All new client accounts must go through AML (Anti-Money Laundering) and KYC (Know Your Customer) processes to protect against identity theft and money laundering. These processes can be cumbersome and often involve entering and verifying client information in multiple places. Firms may be tempted to skip some onboarding steps, but that can be a slippery slope for noncompliance.

Faulty Internal Access and Verification

A firm can have a robust data and document storage system, but if that system isn’t secured, it opens the doors to potential compliance issues. Systems need to have multiple steps of verification and require staff to change passwords regularly. Not deleting access for past employees and leaving private client information on screens in public areas puts a firm at risk for noncompliance.

Not Properly Destroying Physical Forms

Firms are required to keep records for years and then dispose of the forms properly. That means shredding them in a secure location where clients’ private data can’t be recovered. A compliance red flag is when firms don’t prioritize the proper disposal of their clients’ information and documentation.

Many red flags can be avoided or corrected with a secure data management platform like Docupace. Automating document management and streamlining compliance issues ensures client and firm data is stored safely and securely.

Contact us for a free demo.

Want to read more
from our thought leaders?

Explore our Blog
Share This Article
The Platform
  • Platform Overview
Solutions
  • Advisor Transitions
  • Client Onboarding
  • Compensation Management
  • Compliance TRACKR
  • Document Management
  • PreciseFP
  • RIA Productivity Suite
  • Surveillance and Compliance
Resources
  • Blog
  • News & Events
  • Glossary
  • eLearning & Documentation
Company
  • About
  • Contact
  • Careers
  • Back Office Hero Day
  • Security
  • Partner Integrations
  • Legal
RECEIVE NEWSLETTER UPDATES

© Docupace Technologies 2023

  • Privacy Policy
  • Docupace's LinkedIn
  • Docupace's Twitter
  • Docupace's Facebook
  • Docupace's Youtube
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
Cookie SettingsAccept
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT