Policies and Procedures Manual

NASAA Model Rules

The National American Securities Administrators Association, or NASAA has proposed a uniform rule that revolves around Policies and Procedures manuals. Apparently, there are too many boilerplate Policies and Procedures manuals floating around that are not customized to each individual RIA firm. As a result of seeing too many of these boilerplate manuals, they agreed on a new Model Rule for each state. The comment period for this rule ended on August 1, 2020. Therefore, I suspect that we will see this rule added to their Model Rules list soon. After it is added, then each state can adopt it on their own schedule. The goal of this Model Rule is to obtain some consistency, but also to point out glaring weaknesses in typical boiler plate documents. The text of the Model Rule can be found here.

The Main Items in the NASAA Model Rule

The Policies and Procedures Manual, sometimes called a Compliance Manual, is typically a collection of how you run your firm. It covers a multitude of areas such as Trading, Ethics, Anti-Money Laundering, Books and Records, Chief Compliance Officer duties, Advertising, Soft Dollar Arrangements, Business Contingency Planning, Succession Planning, and Death of Key Personnel. It also has a collection of current forms in use by the firm. With the advent of this new NASAA Model Rule, it probably is a great idea to update your documents to meet this new Model Rule.

It is important that annual reviews be documented and your Policies and Procedures Manual is updated as needed. In a regulatory exam, this is a document that gets quickly outdated if not updated on a periodic basis. Further, if it does not comply with the NASAA Model Rule, then you are likely to run into problems during an exam, or even during initial licensing. Some states want to see your Policies and Procedures manual before they will license your firm.