COVID-19 Planning Is Top Compliance Concern

Business continuity planning related to COVID-19 has replaced cybersecurity as a top concern for compliance officers at advisory firms, according to a just-released Investment Adviser Association poll.

The annual 2020 Investment Management Compliance Testing Survey, now in its 15th year, found that 384 compliance officers are most worried about business continuity plans, eclipsing  cybersecurity, which had ranked as the top compliance concern for six consecutive years.

The 2020 survey was cosponsored by IAA, ACA Compliance Group and BrightSphere Investment Group.

Forty-three percent of the firms responding had $1 billion to under $10 billion in regulatory assets under management. 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 from April 20 through May 31.

While nearly two thirds (64%) of respondents cited COVID-19-related continuity planning as the hottest compliance topic, an overwhelming 88% reported that COVID-19 had caused no material impact to their firm. Eighty-one 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.”

Other top compliance concerns 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, the survey found.

Sixty-two percent of compliance officers also said they had 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%) also continue to wear more than one hat, with 25% also serving in some legal capacity.