Business continuity planning (BCP) in the Covid-19 era tops the list of investment management compliance professionals’ concerns, according to the Investment Adviser’s Association’s new compliance testing survey.

Getting BCP right edged out cybersecurity, which has led chief compliance concerns for six consecutive years, IAA reported in its “2020 Investment Management Compliance Testing Survey,” now in its 15th year. Compliance officers from 384 investment advisor firms participated in the survey.

While nearly two thirds (64%) of compliance professionals cited Covid-19-related BCP as their most pressing compliance issue, 88% reported that Covid-19 had not caused material impact to their firm.
“That finding is consistent with what we have heard from our member firms repeatedly since late March,” IAA President and CEO Karen Barr said in statement. “Due to significant testing and advance preparation, most firms were well prepared to operate remotely and serve their clients. And that underscores the most important takeaway from this year’s survey—that firms continue to strengthen their compliance programs."

Some 81% of responding firms reported that all of their employees were working from home and managing human resources remotely was the top focus of many, according to the survey, which was cosponsored by IAA, ACA Compliance Group and Brightsphere Investment Group.
As a nod to industry preparation, the majority of respondents (69%) who said they included plans for responding to a pandemic in their BCP did so prior to the outbreak and 79% said they plan to make no material enhancements to BCP.

Enrique Alvarez, senior principal consultant at ACA Compliance Group, called the impact of the pandemic on investment advisors’ ability to maintain business continuity and fulfill their abide their fiduciary duty “a litmus test which it appears the industry has passed.”

He called the industry’s response to the pandemic “a case study that demonstrates that thoughtful and careful consideration of policies regardless of topic can lead advisers down a safe path even if that path was unexpected and volatile.”

Completing the top five compliance hot topics identified by compliance professionals were cybersecurity (57%); advertising/marketing (25%); conflicts of interest (21%); and ESG/sustainability (14%). More than half (55%) of responding firms reported conducting a mock SEC exam in the past year, up from 30% in 2019.
Other top survey findings included the following:

• Almost all firms (93%) have a formal cybersecurity program in place, up from 87% last year. Not surprisingly, firms report engaging in an increasing number of cybersecurity assessments and tests.
• More than half (54%) of respondents have adopted written anti-bribery and corruption compliance policies and procedures addressing the Foreign Corrupt Practices Act, although a majority of responding firms (66%) do not provide advice to clients outside the U.S.
• With regard to Reg BI compliance, 62% of respondents have retail investor clients entitled to receive the new Form CRS and 41% reported they plan to deliver the form to all of their clients.
• The majority of CCOs (60%) continue to wear more than one hat, with 25% also serving in some legal capacity at their firms.
“Consistent with our initial mission in creating the survey, we continue to seek to offer regulatory hot topics to assist compliance professionals in understanding common practices and identifying practical testing options to measure, and perhaps enhance, their compliance programs,” Brightstar Investment Group CCO Amy Yuter said.
Firms managing $1 billion to under $10 billion in regulatory assets under management (RAUM) accounted for 43% of respondents. Roughly half of the remaining respondents were from firms managing $10 billion or more, with the other half managing less than $1 billion. The survey was conducted in April and May.
The 2020 Investment Management Compliance Testing Survey is available here.