Am I Even Allowed To Outsource? The SEC’s Risk Alert On Compliance

When it comes to managing your firm’s compliance, the question often arises: “Can I outsource everything? Is it even allowed? Will the regulators come after me?” The truth is, outsourcing your Chief Compliance Officer (CCO) responsibilities is permitted, but only if done right.?

The SEC’s recent Risk Alert on Outsourced Compliance Providers sheds light on the common pitfalls and how My RIA Lawyer ensures we avoid them as an outsource compliance provider.

The SEC’s Risk Alert emphasizes that while the challenges of managing compliance internally versus outsourcing may differ, the measuring stick remains the same. The quality and thoroughness of your compliance program cannot falter simply because you’ve chosen to outsource. Unfortunately, some firms have found themselves in hot water because their outsourced CCOs were stretched too thin—often serving multiple, unaffiliated firms without sufficient resources. At My RIA Lawyer, we cap the number of firms that we act as CCO for ensuring you a high quality of services and that each client receives the dedicated attention and resources necessary to maintain a robust compliance program.

Moreover, one of the more concerning findings in the SEC’s Risk Alert was that outsourced CCOs who didn’t have direct access to a firm’s records often produced reviews that didn’t reflect the firm’s actual practices. In contrast, those who had independent access to the necessary records conducted far more accurate and effective reviews. At My RIA Lawyer, we gain direct access to your systems, ensuring that we can thoroughly and accurately review your operations. This means no surprises, just compliance that truly reflects your firm’s practices.

However, a cookie-cutter approach to compliance simply doesn’t work. The SEC noted that effective compliance programs rely on accurately identifying a firm’s unique risks and crafting policies that address those risks. Generic compliance calendars and off-the-shelf policies don’t cut it. At My RIA Lawyer, we go beyond the basics. We conduct a full risk assessment, considering everything from your location and vendors to your technology stack. We then tailor your policies and procedures to reflect the unique aspects of your business. Our goal is to ensure that your compliance manual isn’t just a document on a shelf—it’s a living, breathing reflection of your operations.

But as your firm evolves, so too must your compliance policies and procedures. The SEC’s alert highlighted instances where firms’ actual practices didn’t align with their documented policies. This discrepancy often arose because outsourced CCOs failed to update the firm’s compliance manual to reflect its current operations. My RIA Lawyer takes a proactive approach. We continually review and update your policies to ensure they align with your firm’s growth and changes in the regulatory landscape.

We don’t just set it and forget it; we’re committed to ongoing compliance management.

Finally, the SEC found that outsourced CCOs who rarely visited their clients’ offices or engaged in training had limited authority and visibility within the organization, which hindered their effectiveness. At My RIA Lawyer, we believe in being visible and accessible. Our CCOs are onsite twice a year, conducting face-to-face interviews, engaging with your team, and providing annual training. This hands-on approach ensures we have a deep understanding of your firm and the authority to implement necessary changes.

The SEC’s Risk Alert concludes with an essential reminder: whether your CCO is internal or outsourced, they must be empowered with sufficient knowledge and authority to be effective. At My RIA Lawyer, we ensure our CCOs are not only knowledgeable but also fully empowered within your organization to drive compliance success. If you’d like to read the full Risk Alert you can do so HERE. ?

Outsourcing your compliance doesn’t mean cutting corners. With My RIA Lawyer, it means elevating your compliance program to a level that meets and exceeds regulatory expectations. If you’re ready to take compliance off your plate once and for all reach out today to find out more about our Outsourced Compliance Department services.?