Massive spike in deficiencies at smaller RIAs

SEATTLE — Deficiencies found by regulators during their examinations of state-registered RIAs jumped nearly 60% to 7,907 in the first half of the year, and agencies are signaling plans to make advisors accountable for shortcomings in cybersecurity, officials say.

While recordkeeping is the most frequently cited concern among RIAs with $100 million in assets under management or less, the new category of cybersecurity helped drive the growth in deficiencies, according to a survey released this week by the North American Securities Administrators Association.

State securities regulators examined 25 compliance areas, up from 22 in the last study by NASAA in 2015. State-registered RIAs that year showed only 4,983 deficiencies over six months. Regulators at the state level echoed SEC officials’ warnings about cybersecurity and their bulked-up exam capacity.

“Training and technology have combined to enable state examiners to conduct more examinations and better detect deficiencies,” NASAA Investment Adviser Section chairwoman Andrea Seidt said in a statement released at the group’s conference.  MORE