2020 Investment Management Compliance Testing Survey: BCP Related to COVID-19 Now Top Compliance Co
July 17, 2020
Business Continuity Planning related to COVID-19 is now the top concern of investment management compliance professionals – edging out Cybersecurity, which had headed their rankings of hot topics for six consecutive years.
Compliance officers from 384 investment adviser firms participated in the 2020 Investment Management Compliance Testing Survey, an annual survey now in its 15th year. The 2020 survey was cosponsored by the Investment Adviser Association (IAA), ACA Compliance Group and BrightSphere Investment Group. Firms managing $1 billion to under $10 billion in regulatory assets under management (RAUM) accounted for 43 percent of the 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 ran from April 20 through May 31.
While nearly two thirds (64 percent) of respondents cited COVID-19-related BCP as the hottest compliance topic, an overwhelming 88 percent reported that COVID-19 had caused no material impact to their firm. Fully 81 percent of responding firms reported that all of their employees were working from home.
“That finding is consistent with what we at the IAA have heard from our member firms repeatedly since late March,” said IAA President & CEO Karen Barr. “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.”
“The impact of COVID-19 on investment advisers’ ability to maintain business continuity and to continue to abide by their fiduciary duty can be seen as a litmus test which it appears the industry has passed,” said Enrique Alvarez, Senior Principal Consultant at ACA Compliance Group. “This is a great 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.”
“It’s the survey’s 15-year anniversary,” noted Amy Yuter, Chief Compliance Officer of BrightSphere Investment Group. “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.”
Completing the top five compliance hot topics identified by respondents were: Cybersecurity (57 percent); Advertising/Marketing (25 percent); Conflicts of Interest (21 percent); and ESG/Sustainability (14 percent). More than half (55 percent) of responding firms reported conducting a mock SEC exam in the past year, up from 30 percent in 2019.
Other notable survey findings include:
- The vast majority of responding firms (93 percent) have a formal Cybersecurity program, up from 87 percent last year. Firms are engaging in an increasing number of cybersecurity assessments and tests.
- More than half (54 percent) of respondents have adopted written Anti-Bribery and Corruption compliance policies and procedures addressing the Foreign Corrupt Practices Act, but a majority of responding firms (66 percent) do not provide advice to clients outside the U.S.
- 62 percent of respondents have retail investor clients entitled to receive the new Form CRS – and 41 percent reported they plan to deliver the form to all of their clients.
- The majority of CCOs (60 percent) continue to wear more than one hat, with 25 percent also serving in some legal capacity.
Full results of the 2020 Investment Management Compliance Testing Survey are available on the IAA’s website.
TAGS: Compliance Testing Survey, Compliance, BCP, Cybersecurity, COVID-19, Coronavirus