The SEC Office of Compliance Inspections and Examinations ("OCIE") alerted investment advisers to the most recurrent compliance issues related to the Cash Solicitation Rule (the "rule"). The rule generally prohibits an investment adviser from paying a cash fee to any person who solicits clients for the adviser unless the arrangement complies with various conditions.
In its Risk Alert, the OCIE stated that it observed advisers:
- with third-party solicitors that did not provide solicitor disclosure documents to prospective clients or supply inadequate disclosures;
- that did not, in a timely manner, obtain signed and dated client acknowledgments of receipt of the adviser brochure and the solicitor disclosure document;
- that paid cash fees to solicitors without sufficient, or any, solicitation agreements in effect;
- that did not make an effort to determine whether third-party solicitors complied with their solicitation agreements; and
- with similar conflicts that may implicate other provisions of the Advisers Act (e.g., an adviser's fiduciary duty pursuant to Advisers Act Sections 206(1) and 206(2)).
The OCIE urged advisers to review their policies and procedures to promote improvements in adviser compliance programs.
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