Many U.S. investment advisers fall short on record-keeping -study

Mon Oct 7, 2013 6:08pm EDT
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* Some don't document why investments are right for clients

* Some lack written contracts, lack clarity in calculating fees

* "Mid-sized" advisers moved to state oversight after Madoff scandal

By Suzanne Barlyn

SALT LAKE CITY, Utah, Oct 7 (Reuters) - Many U.S. state-registered investment advisers are failing to follow basic industry record-keeping rules, according to a nationwide series of examinations by state regulators.

One of the biggest problems: many advisers are not adequately documenting why their investment choices are appropriate for clients.

Examination results compiled for a study conducted every two years by the North American Securities Administrators Association, or NASAA, also revealed that some advisers do not have written contracts with clients or properly describe their formulas for calculating fees, NASAA said.

Record-keeping problems topped the five most common violations at state-registered investment advisers who were examined during the project. NASAA, whose members also include regulators from U.S. territories, Canadian provinces, and Mexico, unveiled the results late on Monday, the second day of its annual meeting in Salt Lake City, Utah.

Investment advisers must register with either states or the U.S. Securities and Exchange Commission, depending on the amount of assets they manage for clients. Securities law requires investment advisers to act in their clients' best interests when making investment decisions.   Continued...