NASAA Membership Exams Provide Insight for Investment Advisers

Common Compliance Gaps for Investment Advisers

The North American Securities Administrators Association (NASAA) has released its 2025 Coordinated Investment Adviser Exams Report, offering valuable insight into common compliance gaps and areas of regulatory concern for state-covered investment advisers.

Based on 1,086 examinations conducted between February 1 and July 31, 2025, the report identified 3,402 violations across 23 categories, ranging from registration and books and records to supervision, client contracts, and fees.

While the findings highlight recurring issues—many of which have appeared in prior years—they also underscore the importance of implementing NASAA’s recommended best practices to strengthen compliance programs, protect clients, and mitigate regulatory risk.

Key Areas of Reported Violations

The examinations documented violations across a wide range of categories, with the following percentages highlighting where issues most frequently occurred.

Registration – 17%

• Form ADV – Inaccuracies and inconsistencies between ADV Parts 1 and Part 2
• Form U4 – Inaccuracies and undisclosed businesses

Books and Records – 21%

• Client suitability information
• Trial balances/financial statements
• General and auxiliary ledgers
• ADV Part 2 (Brochures) amendments and revisions
• All written client agreement issues

Supervision and Compliance – 15%

• No/inadequate protection of vulnerable clients
• Not current/up-to-date manuals
• No/inadequate maintenance of supervisory/compliance procedures
• No/inadequate Business Continuity Plan

Client Contracts – 17%

• Not properly executed (signatures and dates)
• Contains impermissible hedge clause(s)
• Not in writing
• Fee formula/fee is not clearly stated

Fees – 9%

• Fee charged doesn’t match contract or Form ADV
• Charging miscalculated fees

Advertising – 6%

• Untrue or misleading statements or omissions-qualifications, services or fees
• Insufficient website disclaimer

Other violations:

• Lack of written information regarding the firm’s information security policy
• Failure to evidence the annual delivery of the firm’s privacy policy
• No testing of cybersecurity vulnerability

Best Practices for Adviser Compliance

In addition to the examination findings, NASAA offered the following best practices for investment advisers:

Suitability and client information. Firms should review and update on an annual basis client account information, including suitability.

Client Contract Review. Firms should review and update all client advisory contracts, clearly stating fees and services.

Compliance and Supervisory Manuals. Prepare a written compliance and supervisory procedures manual relevant to the type of business. The manual should incorporate a business continuity plan and information security policies/procedures that include:

• Having a written policy in place
• Definition of who is responsible
• Defined responsibilities
• How often performed
• How evidenced (in writing)

Fee Review and Documentation. Firms should calculate and document fees correctly in accordance with contracts and Form ADV requirements. Advisers should ensure fees are reasonable for the services provided.

Marketing and Advertising Review. Firms should review all advertisements, including websites and social media, for accuracy and ensure all statements are not misleading or otherwise omitting necessary information.

Accurate Financial Reporting.  Firms must keep accurate and current financials. These must be filed timely, with the appropriate jurisdiction. Firms should also ensure they maintain adequate minimum net worth, or obtain a surety bond, if required.

Partner with the Experts for Compliance Support

Oyster Consulting’s regulatory compliance experts have extensive experience in assisting investment advisers navigate the requirements of creating and enforcing written supervisory procedures, conducting testing and providing training to sales and operations staff. We can also help with registration, outsourcing your Chief Compliance Officer role, or conducting annual reviews. Establish a compliant program aligned with industry best practices to position your firm for long-term success.

Modern Solutions for Compliance

Today’s industry demands a modern, efficient compliance program to protect your firm and clients. Oyster Solutions compliance management software provides visibility and tracking for compliance tasks, procedures, trade monitoring, portfolio monitoring, suitability and risk scoring.  Oyster Solutions automated workflows ensure your policies and procedures are being followed and enforced.