Why Aren’t VOS Team Members Subject to Personal Securities Reporting Requirements?
By Heather Rivera, Director of Operations, FPQP®, CSRIC®, ABFP®, M.Ed.
There has been quite a bit of recent discussion with our advisors about personal securities reporting requirements, supervised persons, and access persons. I wanted to address this and clarify our related policies and best practices.
Many advisors have asked their Client Service Specialists to provide their personal brokerage statements on a quarterly basis. This is not an unreasonable request; compliance requires it, right? Generally, yes. However, due to the specific nature of the relationship between VOS and your firm, this responsibility does not fall on advisors.
Here is the breakdown of our reasoning.
According to the SEC, the “access persons” of every advisory firm are “required to report their personal securities transactions and holdings”. This begs the question – what exactly is an “access person”?
The SEC’s definition of “access person” is as follows:
An access person is a supervised person who has access to nonpublic information regarding clients’ purchase or sale of securities, is involved in making securities recommendations to clients or who has access to such recommendations that are nonpublic.
In order to be an “access person,” one must first be a “supervised person”. We dove a bit deeper into Rule 204A-1, where Form ADV’s Appendix C, Term 42 provides a definition of Supervised Person.
Supervised Person: Any of your officers, partners, directors (or other persons occupying a similar status or performing similar functions), or employees, or any other person who provides investment advice on your behalf and is subject to your supervision or control. [Used throughout Part 2]
Based on the above, a supervised person must meet two criteria:
1. Provide investment advice on behalf of the advisor; AND
2. Be subject to the advisor’s supervision or control.
VOS personnel meet neither of these requirements.
The definition of supervised person requires providing investment advice on behalf of the advisor. VOS personnel NEVER provide advice of any kind to clients, investment or otherwise. Every action taken by your Client Service Specialist is always executing a decision made by the advisor or a member of the advisory firm’s team.
Additionally, VOS team members are under the supervision and control of Virtual Outsource Solutions, with which each advisory firm holds a service contract. Securities reporting requirement management does not fall under the purview of the individual advisory firms. It would make just as much sense to ask for the personal statements of personnel from your CRM, planning software, or custodian.
Our client agreement now includes language to this effect, and all our team members have signed a Compliance Attestation Addendum to their contracts. We are happy to share copies of this with any of our advisors upon request.
Fundamentally, the main reason VOS exists is to make your life easier. We are delighted to assist you in any area of your practice, but the fact remains:
You make the decisions. We execute them.
Source: SEC.gov Final Rule: Rules Implementing Amendments to the Investment Advisers Act of 1940
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