|
A primary responsibility of an investment adviser is the supervision of its employees, to ensure that all of its activities comply with disclosures made to clients and with the provisions of applicable securities laws.40 The most effective way to fulfill this responsibility is to construct and implement a comprehensive system of internal controls and supervisory procedures. Particular attention should be given to controls in those areas of an adviser's activities that pose the greatest potential for creating conflicts of interest or other results that can harm clients. During an inspection, examiners carefully evaluate advisers' internal controls and supervisory procedures. The following examples illustrate weaknesses in internal controls found during examinations:
|