Marketing and artificial intelligence (AI) follow closely behind

The 2024 Investment Management Compliance Testing Survey, published today, highlights the top compliance concerns for investment management professionals. This year, electronic communications surveillance and off-channel communications have emerged as the primary focus, surpassing the Marketing Rule. The survey, now in its 19th year, is a joint project of the Investment Adviser Association, ACA Group, and Yuter Compliance Consulting.

Top Compliance Concerns

The survey identified several key compliance topics, reflecting the SEC’s examination, enforcement, and rulemaking priorities:

• Electronic Communications Surveillance/Off-Channel Communications (59%)
• Advertising/Marketing (57%)
• AI/Predictive Analytics (46%)
• Cybersecurity (37%)
• Private Funds (16%)
• Conflicts of Interest (10%)
• Vendor Due Diligence (8%)
• Environmental, Social, and Governance (ESG) (8%)
• Anti-Money Laundering (AML) (6%)
• Books and Records (6%)

Industry Focus on SEC Examinations

The survey reveals a strong industry focus on SEC examinations, with 83% of respondents having undergone an exam or being currently examined in the past five years. The top focus areas in recent SEC exams include:

• Books and Records (58%)
• Advertising and Marketing (57%)
• Conflicts of Interest (50%)

Enhancements in Compliance Programs

Investment advisers are proactively enhancing their compliance programs:

• Mock Exams: 65% of respondents have conducted or intend to conduct mock SEC exams. Of those, 85% reported that mock exams helped prepare them for actual SEC exams and identified areas for improvement.
• Increased Testing: The top areas of increased testing align with SEC focus areas:
  • Electronic Communication Surveillance/Off-Channel Communications (73%)
  • Advertising/Marketing (65%)
  • Cybersecurity (57%)
  • Vendor Due Diligence (44%)
  • Books and Records (36%)

Notable Insights from Industry Leaders

• Amy Yuter, Managing Principal of Yuter Compliance Consulting: "The survey provides valuable testing and control ideas, trending insights, and practical enhancement opportunities for the industry."
• Carlo di Florio, ACA’s Global Advisory Leader: "The focus on off-channel communications highlights the need for robust electronic surveillance strategies. Investment advisers prioritizing compliance and industry best practices are better positioned to navigate regulatory complexities."
• Karen Barr, President and CEO of IAA: "The survey reflects increased testing in critical areas as compliance officers’ workload expands significantly."

The 2024 Investment Management Compliance Testing Survey underscores the evolving priorities and challenges in the compliance landscape. With a focus on off-channel communications, advertising, AI, and cybersecurity, investment advisers are enhancing their compliance programs to meet regulatory expectations and mitigate risks. The survey serves as a comprehensive resource for identifying top compliance concerns and best practices in the investment management industry.