Horter News

Outside Business Activities

Compliance Today Blog #6 September 20, 2017 Outside Business Activities Welcome back to another edition of Compliance Today!   Our goal is to continue bringing you information on compliance topics relevant to you and your practice.   Today we are discussing Outside Business Activities.  Almost all of our advisors are engaged in other business activities beyond just their role as an Investment Adviser Representative under Horter.  If this applies to you, then it is important that you understand the compliance responsibilities that come with engaging in these other activities. An Outside Business Activity (“OBA”) is an activity where a registered person is compensated, or has the reasonable expectation of compensation, from someone other than their Registered Investment Adviser (e.g. Horter).   It may also be an activity where a registered person may not be compensated, but the activity may still create a conflict with Horter or its clients.   Certain non-compensated charitable activities may be considered an OBA where the registered person has access or control over charitable funds or investments. There are two important regulatory reasons for monitoring Outside Business Activities: (a) Form ADV disclosure purposes and (b) Form U4 disclosure purposes. A Registered Investment Adviser is required to disclose to clients all potential and actual conflicts of interest, including outside activities of the firm and its related persons, on the Form ADV Part 2.   In addition, Investment Adviser Representatives (“IARs”) must disclose their employment history for the previous 10 years and their current outside business activities on the Form U4.   As an IAR, it is ultimately your responsibility to keep your Form U4 current and accurate.   You must be cognizant of the 30 day deadline for making material updates to the Form U4.   Changes to your Outside Business Activities are considered a material change.   Failure to keep a current and accurate Form...
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Client Referrals

Compliance Today Blog #5 September 13, 2017 The Do’s and Don’ts of Client Referrals We all know that the best compliment a client can give is a referral to your business. And as our parents have always taught us, when someone gives you a compliment you say thank you.  When it comes to clients referring potential new clients to your practice, saying thank you is literally all you are allowed to do.  We receive a lot of questions surrounding what is appropriate and allowed in regards to client referrals, so today’s compliance blog is dedicated to answering these questions for you. The acquisition cost for a new client generated from a client referral is about as low as you are likely to find in the investment advisory business.   Some prospective clients may come to you from educational classes, while others may come to you from your advertising and marketing efforts.  Not only do these approaches cost money, but you still need to win the prospective client’s trust and respect before they will enter into an investment advisory relationship with you.  Referrals, on the other hand, cost no money to generate, and the prospective client is already inclined to view you positively. It is a natural reaction, therefore, to want to engage in actions that maximize the number of referrals you receive from existing clients.  If my client is referring business to me now, imagine how much business they will refer if I compensate them somehow for referrals.   And this is where we receive the majority of our advisor questions. Under no circumstances can you directly or indirectly compensate clients for referring business to you, or otherwise provide them with something of value in exchange for a referral.   Compensating clients, directly or indirectly, for referrals can inadvertently turn them into solicitors...
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Client Disclosure Documents and Delivery Requirements

Compliance Today Blog #4 Date: September 6, 2017 ADV Disclosure Documents – Who, What, When, Where, Why, and How? Did you know that in 2015 20% of all SEC Exams resulted in deficiencies regarding the ADV disclosure documents, up from 18% in 2013?   Hello and welcome to Compliance Today!   We hope you enjoy our blog posts and find the information helpful in your day to day business. If you have questions regarding this post or any previous post please email us at compliance@him-ria.com and we will be happy to help anyway that we can! Today we are going to be discussing the Form ADV disclosure documents.  Despite much guidance provided on the proper completion and delivery requirements of the Form ADV, it continues to frequently cause compliance issues for investment advisory firms.   We will be discussing each section of the ADV along with the delivery requirements.  The delivery requirements are set forth in Rule 204-3 of the Investment Advisors Act of 1940. The Form ADV is used by investment advisors to register with both the SEC and state securities authorities.   The form consists of two parts as explained below. You can view any RIAs Form ADV on https://adviserinfo.sec.gov/IAPD/Default.aspx. Please note that when clients sign our Quarterly Client Agreement, they are acknowledging receipt of the Form ADV 2A Firm Brochure, Form ADV 2B Brochure Supplement and our Notice of Privacy Practices.   Therefore it is imperative that you actually provide these documents as outlined below.   ADV Part 1 The Form ADV Part 1 discloses information about the investment advisor’s business, ownership, clients, employees, business practices, affiliations and any disciplinary events of the advisor or its employees.   The ADV Part 1 generally contains information that is important to the regulators, and is used in the registration process and to manage regulatory and...
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