compliance

Glossary terms related to compliance.

• RIA vs. Broker-Dealer: Key Differences

  Registered investment advisers (RIAs) and broker-dealers are both regulated financial intermediaries, but they operate under different regulatory frameworks, compensation structures, and standards of care.

• Reg BI (Regulation Best Interest)

  Regulation Best Interest (Reg BI) is an SEC rule requiring broker-dealers to act in the best interest of retail customers when making investment recommendations. Effective June 30, 2020.

• Model Portfolio

  A model portfolio is a pre-defined asset allocation template used by investment advisers to manage multiple client accounts consistently. It simplifies portfolio construction, rebalancing, and compliance documentation.

• Fiduciary Standard

  The fiduciary standard requires investment advisers to act in the best interest of their clients, putting client interests ahead of their own. It is the highest standard of care in financial services.

• Books and Records (Investment Adviser)

  The books and records rules require registered investment advisers and broker-dealers to maintain specific records for defined retention periods. SEC Rule 204-2 governs RIAs; Rule 17a-4 governs broker-dealers.

• Suitability

  What suitability means for financial advisors, how it relates to the IPS and fiduciary duty, and what a suitability gap is.

• Portfolio drift

  What portfolio drift is, why it creates compliance and suitability risk, and why daily monitoring beats quarterly reviews.

• Investment Policy Statement (IPS)

  What an Investment Policy Statement is, what it contains, and why it's the reference point for monitoring portfolio drift and suitability.

• Audit trail

  What an audit trail is in an advisory context, why books-and-records rules require one, and what makes a research audit trail defensible.

• AI washing

  What AI washing is, the 2024 SEC enforcement actions that put it on the map, and how advisors avoid it.