“Training and technology have combined to enable state examiners to conduct more examinations and better detect deficiencies,” said Andrea Seidt, chair of NASAA’s Investment Adviser Section and Ohio's securities commissioner.
Ranked by number of deficiencies found, books and records (2,625 deficiencies) continued to be the most problematic compliance area for state-regulated investment advisors, accounting for more than twice as many deficiencies found by state examiners as the next highest problem area, registration (1,165 deficiencies). Contracts (921 deficiencies), cybersecurity (698 deficiencies), and custody matters (364 deficiencies) rounded out the top five leading areas of deficiencies.
State securities regulators oversee investment advisors with assets under management of $100 million or less. Of the 946 asset-managing investment advisors included in this year’s coordinated examinations, 336 had assets under management between of $30 million and $100 million and 610 had assets under management of less than $30 million.
The Dodd-Frank Act required about 2,100 mid-sized investment advisors with assets under management between $30 million and $100 million to switch from federal to state oversight in 2013. The NASAA examination report is available here.