If your firm is subject to Rule 17j-1 (Personal investment activities of investment company personnel), it’s probably not the compliance team’s favorite rule. Rule 17j-1, like its counterpart in the Investment Adviser’s Act, Rule 204A-1, can be labor-intensive and fraught with risk for firms that inadvertently miss something in their compliance reviews.
While funds’ codes of ethics do not have to be quite as broad as advisors’ codes, the rule does include very specific prohibitions and requirements. Firms that don’t have processes or monitoring tools in place could find themselves facing fines or other penalties. Fortunately, the ComplySci platform provides a user-friendly solution that can help reduce the pain of 17j-1 compliance.
How Technology Facilitates Rule 17j-1 Compliance
Implementing compliance technology can help your compliance team be more efficient and effective with 17j-1 oversight requirements in several ways:
- No need to obtain or manually review paper account statements. With ComplySci’s direct broker feeds from more than 175 brokerage houses and clearing firms, your access persons won’t need to submit paper statements – and your compliance team won’t need to chase them down or spend time manually reviewing them. In addition to the direct broker feeds, ComplySci also has access to hundreds of other brokers’ data through our established relationships with custodians and clearing houses.
- Easy for access persons and compliance staff to use – anywhere! Part of the challenge of 17j-1 compliance is getting access persons to actually submit all required personal trading information, pre-approval requests, and certify compliance on time when required. The ComplySci platform makes it easy for both employees and the compliance team to do their part. The platform was built with flexibility in mind, so authorized users can access the system wherever they are from their mobile devices. This can improve usage rates and can greatly cut down on late submissions or responses.
- Limit risk of inadvertent restricted list violations. ComplySci also makes it easy to administer your restricted list, helping avoid the consequences of an employee inadvertently trading in a security the fund holds. Changes can be applied in real time, limiting error risk.
- Free up time and resources in the compliance department. The system’s built-in workflows also remove much of the pain that comes with getting employees to certify compliance with the fund’s code of ethics. Because the process and periodic reminders are automated, compliance personnel are free to tackle other projects and tasks, knowing that any exceptions will be flagged for manual review.
- Simple report generation makes board reporting a breeze. Finally, rule 17j-1 requires firms to provide periodic reports and certifications to the fund’s board, including reports of any material violations. Firms that rely on the ComplySci platform find it simple to generate thorough, real-time reports that can meet compliance requirements and keep the board informed.
Complying with the requirements of Rule 17j-1 will likely never be described as easy. However, ComplySci can ease the burden of 17j-1 compliance by automating and improving your existing processes for:
- Preclearance requests
- Restricted lists
- Initial holdings reports
- Quarterly and annual transaction reports
- Board reporting
- Periodic 17j-1 certifications