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Independent Assessment Report

Canon Capital Investment Advisory

 

CEFEX Investment Advisor Certification

 

 

Investment Advisor Definition

 

A fiduciary who is responsible for managing a client’s overall investment strategy, which may include deciding on the client’s asset allocation, developing the client’s investment strategy, implementing the strategy with appropriate Investment Managers, and monitoring the strategy, on a one-time or ongoing basis. The term refers to those who provide specific or comprehensive investment advice including financial advisors, broker-consultants, investment consultants, wealth managers, financial consultants trust officers, financial planners and fiduciary advisers.

 

SECTION 1 – COMPANY INFORMATION

CEFEX File No.: CFX10035
Company Name: Canon Capital Investment Advisory
Address: 484 Harleysville Pike PO Box 228   Harleysville   PA   19438   US
Phone: 215-723-4881

 

SECTION 2 – ASSESSMENT DETAILS

Date of Registration: 2019.09.19
Assessment Number: R12
Assessment Team:
Position Name Company
Client Jennifer Norman Canon Capital Investment Advisory
Client Peter J. Roland Canon Capital Investment Advisory
Analyst Mark D. Mensack Prudent Champion, Inc.

 

CEFEX Registration Committee (CRC)

The CEFEX Registration Committee is responsible for ensuring the consistency, impartiality and technical merit of CEFEX assessments. Members of the CRC include: Blaine F. Aikin, CFP®, CFA, AIFA® Executive Chairman, Fi360 Inc and CEFEX, J. Richard Lynch, AIFA®, Director Fi360, David A. Vriesenga, Senior Partner Vriesport Consulting Services, Roger Levy, AIFA®, Managing Director Cambridge Fiduciary Services LLC, Matthew Boyle, AIFA® Director of Operations, CEFEX and Carlos Panksep, Managing Director, CEFEX.

Attestation

The Analyst is independent of the registered firm. He/she has not been employed or compensated by the registered firm for a period of at least 2 years prior and 6 months following this assessment, for the purposes of providing fiduciary consulting services. The Analyst is an Accredited Investment Fiduciary Analyst (AIFA®) and has the adequate expertise and proficiency to perform this assessment.

Purpose and Scope of this Assessment:

To evaluate the Advisor’s conformance to the practices and associated criteria as defined in the document “Prudent Practices for Investment Advisors” (the Standard) for the declared scope of registration. A full copy of the Standard which is the basis for this assessment, can be found in the Prudent Practices Handbook here.

The scope of registration is as follows:

ERISA defined contribution plans, section 403(b) plans, high net worth clients, and personal trusts.

Summary of Assessment Methodology:

The assessment requires that the Analyst plan and perform a review of a representative sample of the Advisor’s written records, interviews with appropriate personnel and, on a test basis, collect evidence supporting the actions taken by the Advisor in providing services to its clients. Sampling of records was conducted in accordance with the statistical guidelines used by the International Organization for Standardization, which requires a maximum sample size equal to the square root of the total available records.

Assessment elements include:

 

SECTION 3 - ASSESSMENT FINDINGS

 

The following Practices were assessed within the 3 months prior to the Date of Registration shown above and found to be in conformity.

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No. Practice Status
1.1 The Advisor demonstrates an awareness of fiduciary duties and responsibilities.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
1.1.1   The Investment Advisor complies with all laws and rules that apply to the services the Advisor is providing.
1.1.2   The Investment Advisor complies with all applicable Practices and Procedures defined in this Prudent Practices handbook.
1.1.3   The Investment Advisor adheres to all applicable standards of conduct and code(s) of ethics required by law, regulation, employers, and professional organizations.
  Substantiation

Employee Retirement IncomeSecurity Act of 1974 [ERISA]
§404(a) (1)

Regulations
29 C.F.R. §2550.404a-1
Case Law
Tibble v. Edison, Int’l, 135 S. Ct. 1823, 59 E.B.C.2461 (2015), on remand 843 F. 3d 1187 (9th Cir. 2016) and 2017 WL 3523737(C.D.Cal. 2017); Tussey v. ABB, Inc., 52 E.B.C. 2826, 2012 WL 1113291(W.D. Mo. 2012), aff’d in part 2014 WL 1044831 (8th Cir. 2014) and 2017 WL 929202 (8th Cir. 2017), Braden v. Wal-Mart Stores, Inc., 588 F. 3d 585(8th Cir. 2009), 6:08-cv-03109-GAF (W.D. Mo. 2012); Marshall v. Glass/Metal Association and Glaziers and Glassworkers Pension Plan, 507 F. Supp. 378 2 E.B.C. 1006 (D.Hawaii 1980); Katsaros v. Cody, 744 F. 2d 270, 5 E.B.C. 1777 (2d Cir. 1984), cert. denied, Cody v. Donovan, 469 U.S. 1072, 105 S. Ct. 565, 83 L. Ed. 2d 506 (1984); Marshall v. Snyder, 1 E.B.C. 1878 (E.D.N.Y. 1979); Donovan v. Mazzola, 716 F. 2d 1226, 4 E.B.C. 1865 (9th Cir. 1983), cert. denied, 464 U.S. 1040, 104S. Ct. 704, L.Ed.2d 169 (1984); Fink v. National Savings and Trust Company, 772F. 2d 951, 6 E.B.C. 2269 (D.C. Cir. 1985); Metzler v.Graham, 112 F. 3d 207 (5th Cir. 1997)
Other
Joint Committee on Taxation, Overview of the Enforcement and Administration of the Employee Retirement and Income Security Act of 1974 (JCX16­90, June 6, 1990)
Staff of the U.S. Securities and Exchange Commission, Study on Investment Advisers and Broker Dealers, As Required by Section 913 of the Dodd-Frank Act (Jan.,2011)

Investment Advisers Act of 1940 [IAA]
§202(a)(11) [Definition of an‘Investment Adviser’]
§206(1), (2), (3) [Anti-fraud provisions that apply to adviser’s fiduciary obligations]
§203A(b)(1) [State authority over ‘small’ RIAs]

Regulations
Investment Advisers Act Rule 203-1 [Application for Investment Adviser Registration]
Investment Advisers Act Rule 204-2 [Books and Records to be Maintained by Investment Advisers]
Investment Advisers Act Rule 204A-1 [Investment Advisers Codes of Ethics]
Investment Advisers Act Rule 206(4)-1 [Advertisements by Investment Advisers]
Case Law
Scott E. DeSano, et al., SEC Adm Proc 3-12879A (Mar. 6, 2008); Strong Capital Management, Inc., et al., Investment Company Act Release No. 26448 (May 20, 2004); SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963); Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 17 (1979); In re Arleen W. Hughes, Release No. 34-4048 (Feb 18, 1948)
Other
Information for Newly-Registered Investment Advisers, Prepared by the Staff of the Securities and Exchange Commission’s Division of Investment Management and Office of Compliance Inspections and Examinations, http://sec.gov/divisions/investment/advoverview.htm (July 2011)
Unethical Business Practices Of Investment Advisers, Investment Adviser Representatives, And Federal Covered Advisers, NASAA Model Rule 102(a)(4)-1 (Adopted Apr. 27, 1997, Amended Apr. 18, 2004 and Sept. 11, 2005)
Code of Ethics Guidance for Investment Advisers (June 26, 2015)(im-guidance-2015-03.pdf).

State Insurance Regulation
Suitability and Best Interests in Life Insurance and Annuity Transactions, New York Dep’t. of Fin. Svcs. (11 NYCRR 224). (Adopted July 17, 2018; effective Aug. 1, 2019.)
Applicability of the Investment Advisers Act to Financial Planners, Pension Consultants, and Other Persons Who Provide Investment Advisory Services as a Component of Other Financial Services, SEC Interpretive Release No. IA-1092, http://www.sec.gov/rules/interp/1987/ia-1092.pdf (Oct. 8, 1987)
Uniform Prudent Investor Act [UPIA]
§1(a); §2(a); §2(d)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(c)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§7

Case Law
Harvard College v. Amory, 26 Mass. 446, 9 Pick. 454 (1830); Davoue v.Fanning, 2 Johns. Ch. 252 (N.Y. 1816); Fulton v. Whitney, 66 N.Y.548 (1876); and National Labor Relations Board v. Amax Coal Co., 453 U.S. 322, 101 S. Ct. 2789, 69 L.Ed. 2d 672 (1981)

1.2 Investments and investment services provided are consistent with applicable governing documents.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
1.2.1   Investments are managed and investment services are provided in accordance with governing documents, including documents establishing the terms of an account or client engagement and the investment policy statement.
1.2.2   Documents pertaining to the investment management process, including records of decisions made by fiduciaries and clients, are secure and readily and reliably accessible by authorized persons.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(38)(C); §104(b)(4); §402(a)(1); §402(b)(1); §402(b)(2); §403(a); §404(a)(1)(D); §404(b)(2)

Regulations
Interpretive Bulletin 2016-1 (reinstating the language of Interpretive Bulletin 94-2, with certain modifications), 81 Fed. Reg. 95879 (Dec. 29, 2016)
Case Law
Morse v. New York State Teamsters Conference Pension and Retirement Fund, 580 F. Supp. 180 (W.D.N.Y. 1983), aff’d, 761 F.2d 115 (2d Cir. 1985); Winpisinger  v. Aurora Corp. of Illinois, 456 F. Supp. 559 (N.D. Ohio 1978); Liss v. Smith, 991  F. Supp. 278, 1998 (S.D.N.Y. 1998); Dardaganis v. Grace Capital, Inc., 664 F. Supp. 105 (S.D.N.Y. 1987) aff’d, 889 F.2d 1237 (2d Cir. 1989) ); White v. Martin, 286 F. Supp. 2d 1029, 1039-41 (D. Minn. 2003); Kirshbaum v. Reliant Energy, Inc., 526 F.3d 243 (5th Cir. 2008)

Investment Advisers Act of 1940 [IAA]
§204(a)

Regulations
SEC Advisers Act Rule 204-2 [Books and records to be maintained by investment advisers.]
Case law
In the Matter of Covenant Financial Services, LLC and Stephen Shafer, Investment Advisers Act Release No. 4672 (Mar. 29, 2017); In the Matter of Calvert Investment Distributors, Inc. and Calvert Investment Management, Inc., Investment Advisers Act Release No. 4696 (May 2, 2017); In the Matter of Aisling Capital LLC, Investment Advisers Act Release No. 4951 (June 29, 2018) 
Other
Form ADV and Investment Advisers Act Rules, Investment Advisers Act Release No. 4509 (August 25, 2016); Recordkeeping Requirements For Investment Advisers, NASAA Model Rule 203(a)-2, (Adopted Sept. 3, 1987, amended May 3, 1999, Apr. 18, 2004, and Sept. 11, 2005).

Uniform Prudent Investor Act [UPIA]
§1(b); §2(a)–(d); §4
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(a); §3(b); §3(c); §3(e); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§4(a)–(d); §7(6); §8(b) 

1.3 The roles and responsibilities of all involved parties whether fiduciaries or non-fiduciaries are defined and documented.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
1.3.1   All involved parties have acknowledged their roles and responsibilities and fiduciary or non-fiduciary status in writing.
1.3.2   Each investment committee formed, controlled, or required by the investment advisor has a defined set of by-laws or operating procedures to which the committee adheres.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(38)(c); §402(a)(1);§402(b)(2) and (3); §403(a)(2); §404(a)(1)(B); §404(c); §405(c)

Regulation
29C.F.R. 2550.408b-2(c)(1)(iv)(B).
Case Law
Marshall v. Glass/Metal Association and Glaziers and Glassworkers Pension Plan, 507 F. Supp. 378 2 E.B.C. 1006 (D.Hawaii 1980); Katsaros v. Cody, 744 F.2d 270, 5 E.B.C. 1777 (2d Cir. 1984), cert. denied, Cody v. Donovan, 469 U.S. 1072, 105 S. Ct. 565, 83 L. Ed. 2d 506 (1984); Marshall v. Snyder, 1 E.B.C. 1878 (E.D.N.Y. 1979); Donovan v. Mazzola, 716F.2d 1226, 4 E.B.C. 1865 (9th Cir. 1983), cert. denied, 464 U.S. 1040,104 S. Ct. 704, L. Ed. 2d 169 (1984); Fink v. National Savings and Trust Company, 772 F. 2d 951, 6 E.B.C. 2269 (D.C. Cir. 1985); Ellis v. Rycenga Homes, 484 F. Supp. 2d 694 (W.D. Mich. 2007); Jenkins v. Yager, 444 F.3d 916 (7th Cir. 2006).
Other
Joint Committee on Taxation, Overview of the Enforcement and Administration of the Employee Retirement and Income Security Act of 1974 (JCX­16­90, June 6,1990)

Investment Advisers Act of 1940
§205(a)(2)

Cite for Compliance Programs of Investment Companies and Investment Advisers, Advisers Act Release No. 2204 (Dec. 17,2003) [68 FR 74714 (Dec. 24, 2003)] 
Other
Adviser Business Continuity and Transition Plans (proposed rule), Investment Advisers Act Release No. 4439, https://www.sec.gov/rules/proposed/2016/ia-4439.pdf (June 28, 2016).
Information for Newly-Registered Investment Advisers, Prepared by the Staff of the U.S. Securities and Exchange Commission’s Division of Investment Management and Office of Compliance Inspections and Examinations, http://sec.gov/divisions/investment/advoverview.htm (Oct. 8, 1987)

Uniform Prudent Investor Act [UPIA]
§1(a); §2(a); §2(d); §9(a)(1)and (2)

Other
Restatement of Trusts 3d: Prudent Investor Rule §171 (1992)

Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(c)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a) and (b); §7; §8(b)

Case Law
National Labor Relations Board v. Amax Coal Co.,453 U.S. 322, 101 S. Ct. 2789, 69 L. Ed. 2d 672 (1981)
Sacerdote v. N.Y. Univ., S.D.N.Y., No. 1:16-cv-06284-KBF (2018)

1.4 The Investment Advisor identifies material conflicts of interest and avoids or manages conflicts in a manner consistent with the duty of loyalty.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
1.4.1   Policies and procedures for overseeing and managing conflicts of interest, including to avoid self-dealing and making false or misleading statements, are defined and followed.
1.4.2   Conflicts of interest are avoided when prohibited by law and/or governing documents.
1.4.3   Conflicts of interest that are not avoided must be managed in the client’s best interest.
1.4.4   Conflicts of interest that are not avoided must be disclosed to the client and informed client consent must be obtained.
  Substantiation

Internal Revenue Code of 1986, as amended [IRC]
§4975(c)
Employee Retirement Income Security Act of 1974 [ERISA]
§3(14)(A) and (B);§404(a)(1)(A); §405(a); §406(a) and (b); and §408

Regulation
29 C.F.R. §2550.408(b)-2(b), (c), and (e)
Case Law
Whitfield v. Tomasso, 682 F. Supp. 1287, 9E.B.C. 2438 (E.D.N.Y 1988); Tibble v. Edison Int’l,135 S. Ct. 1823, 59 E.B.C. 2461(2015), on remand 843 F.3d 1187 (9th Cir. 2016) and 2017 WL 3523737(C.D.Cal. 2017); People v. Martz, 28 Misc. 3d 1215A, No. 0025/09,2010 WL 2977151 (N.Y. Sup. July 29, 2010)
Other
DOL Advisory Council on Employee Welfare and Benefit Plans Report of the Working Group on Fiduciary Responsibilities and Revenue Sharing Practices, Nov. 7, 2007
DOL Advisory Council on Employee Welfare and Benefit Plans Report of the Working Group on Soft Dollars and Commission Recapture Nov. 13, 1997
DOL Prohibited Transaction Exemption 77-4, 42 Fed. Reg. 18732 (Apr. 8, 1977)

Investment Advisers Act of 1940 [IAA]
§205(a); §206(1) and (2)

Regulation
17 C.F.R. §275.204-3; 17 C.F.R. §275.204A-1; 17 C.F.R.
§275.206(3)-3t; 17 C.F.R. §275.206(4)-6; 17 C.F.R.§275.206(4)-7
Case Law
In the Matter of Blackstone Management Partners L.L.C., Blackstone Management Partners III L.L.C., and Blackstone Management Partners IV L.L.C., Investment Advisers Act Release No. 4219 (Oct. 7, 2015); In the Matter of Centre Partners Management, Investment Advisers Act Release No. 4604 (Jan.10, 2017); In the Matter of Credit Suisse Securities (USA) LLC, Investment Advisers Act Release No. 4678 (Apr. 4,2017); In the Matter of Institutional Investors Advisory Company, Investment Advisers Act Release No. 4747 (Aug.16, 2017); In the Matter of Envoy Advisory, Inc., SEC Investment Advisers Act Release No. 4764 (Sept. 8, 2017); In the Matter of Suntrust Investment Services, Inc., SEC Investment Advisers Act Release No. 4769 (Sept. 14,2017); In the Matter of Financial Fiduciaries, LLC and Thomas Batterman, Investment Advisers Act Release No.4863 (Mar. 5, 2018); In the Matter of Securities America Advisors, Investment Advisers Act Release No. 4876 (Apr.6, 2018); In the Matter of WCAS Management Corporation, Investment Advisers Act Release No. 4896 (Apr. 24,2018); In the Matter of Lyxor Asset Management, Inc., Investment Advisers Act Release No. 4932 (June 4, 2018); In the Matter of Michael Devlin,Investment Advisers Act Release No. 4973 (July 19, 2018)  
Other
Heitman Capital Management et al., SEC No-Action Letter(Feb. 12, 2007); NASAA Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, Model Rule 201(a)(4)-1 (Adopted April 27, 1997,Amended April 18, 2004 and Sept. 11, 2005), http://www.nasaa.org/wp-content/uploads/2011/07/6-IAUnethical091105.pdf; SEC Share Class Selection Disclosure Initiative (announced on Feb. 12, 2018), https://www.sec.gov/enforce/announcement/scsd-initiative.

Uniform Prudent Investor Act [UPIA]
§2; §5
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
Prefatory Note
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§7(1) and (2); §17(c)(12) and(13) 

1.5 Agreements under the supervision of the investment advisor are in writing and do not contain provisions that conflict with fiduciary obligations.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
1.5.1   The investment advisor fully discloses in writing all compensation arrangements and affiliations associated with the service agreement.
1.5.2   If the investment advisor is responsible for oversight of other service providers, the advisor must evaluate all material compensation, affiliations, and the fiduciary status of each service provider.
1.5.3   Agreements are periodically reviewed to ensure consistency with the needs of the client.
1.5.4   Comparative reviews of service agreements for which the Investment Advisor is responsible are conducted and documented approximately every three years.
  Substantiation

Internal Revenue Code of 1986, as amended [IRC]
§4975(d)
Employee Retirement Income Security Act of 1974 [ERISA]
§3(14)(B); §3(38)(C); §402(c)(2); §403(a)(2); §404(a)(1); §408(b)(2)

Case Law
Liss v. Smith, 991 F. Supp. 278 (S.D.N.Y. 1998); Whitfield v. Tomasso, 682 F.Supp. 1287, 9 E.B.C. 2438 (E.D.N.Y. 1988); Kraft Foods Global, Inc., 641 F.3d 786 (7th Cir. 2011) 
Regulations
29 C.F.R. §2550.408b-2; 29 C.F.R. § 2550.408b-2(c).

Investment Advisers Act of 1940
§206(1) and (2)

Case Law
In the Matter of Central States Capital Markets, LLC, et. al, Investment Advisers Act Release No. 4352 (Mar. 16, 2016); In the Matter of Potomac Asset Management Co., Inc., et al., Investment Advisers Act Release No. 4766 (Sept. 11, 2017); In the Matter of Platinum Equity Advisors, LLC, Investment Advisers Act Release No. 4772 (Sept. 21, 2017); In the Matter of TPG Capital Advisors, LLC, Investment Advisers Act Release No. 4830 (Dec. 21, 2017); In the Matter of Aberon Capital Management, LLC & Joseph Krigsfield, Investment Advisers Act Release No. 4914 (May 24, 2018).

Uniform Prudent Investor Act [UPIA]
§2(a); §5; §7; §9(a)(2)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(c); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§5(a)(2); §6(b)(2); §7 

1.6 Sensitive personal identifying information and assets of clients are prudently protected from theft, embezzlement, and business disruption risks.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
1.6.1   The Investment Advisor has a reasonable basis to believe assets are within the jurisdiction of a viable judicial system.
1.6.2   Appropriate procedures are in place to secure and prudently protect the privacy of client or plan data.
1.6.3   Appropriate procedures are in place to assure that sensitive personal identifying information and assets of clients are prudently protected from physical, operational, virtual, and other material risks associated with business disruptions.
1.6.4   The investment advisor has a reasonable basis to believe assets are protected by appropriate insurance, bonding, internal controls, and security measures taken by fiduciaries and other service providers, including the investment advisor’s own firm.
1.6.5   The investment advisor has procedures in place to manage situations where the advisor reasonably believes that a client’s assets are at risk due to suspicious behavior by service providers, the client, or others with access to or influence over the client’s assets.
1.6.6   The investment advisor has documented a succession plan and a business continuity plan that is reviewed and tested periodically.
  Substantiation

Internal Revenue Code of 1986, as amended [IRC]

Other
Revenue Procedures 97-22 and 98-25

Employee Retirement Income Security Act of 1974 [ERISA]
§107; §404(b); §405; §412(a)

Regulations
29 C.F.R. §2550.404b­1
29 C.F.R. § 2520.104b-1
29 C.F.R. §2520.107-1
Case Law
 Varity Corporation v. Howe, 516 U.S. 489, 116 S. Ct. 1065, 134 L.Ed.2d 130 (1996)
Other
H.R. Report No. 93­1280 (93rd Congress, 2d Session, Aug. 12, 1974)
ERISA Advisory Council on Employee Welfare and Pension Benefit Plans Report on Cybersecurity Considerations for Benefit Plans (November 2016). 

Investment Advisers Act of 1940
15U.S.C. 80b

Case Law
In the Matter of R.T. Jones Capital Equities Management, Inc., Investment Advisers Act Release No. 4204 (Sept. 22, 2015).
Regulations
RegulationS-P, 17 CFR Part 248 Subpart A; Regulation S-AM, 17 CFR Part 248, Subpart B;Regulation S-ID, 17 CFR Part 248, Subpart C
Other
SEC Cybersecurity Risk Alert (Aug. 2017) (https://www.sec.gov/files/observations-from-cybersecurity-examinations.pdf); SEC Cybersecurity RiskAlert (Sept. 2015) (https://www.sec.gov/files/ocie-2015-cybersecurity-examination-initiative.pdf)

Investment Company Act
§17(f)

Regulations
Investment Company Act Rule 17f-5 [Custody of investment company assets outside the United States].

Uniform Prudent Investor Act [UPIA]
§2(a); §5; §9(d)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §5(d)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§2(21); §6(e); §7; §11(c) and Comments
State Law
State privacy laws will also often apply and sometimes are much stricter than the laws and regulations outlined above.
Best Practices on Cybersecurity
National Institute of Standards and Technology Cybersecurity Framework V1.1 (Apr. 2018) (https://www.nist.gov/cyberframework

2.1 An investment time horizon has been identified for each investment objective of the client.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
2.1.1   Sources, timing, distribution, and uses of each client's cash flows are documented.
2.1.2   In the case of an individual investor, an appropriate asset/liability study has been factored into the time horizon.
2.1.4   In the case of a defined contribution retirement plan, the investment options provide for a reasonable range of participant time horizons.
  Substantiation

Internal Revenue Code of 1986, as amended [IRC]

Other
IRS Notice 2014-66

Employee Retirement Income Security Act of 1974 [ERISA]
§3(34); §401(b)(1);§404(a)(1); §404(a)(1)(C)

Regulations
29 C.F.R. §2550.404a-­1(b)(1)(A);29 C.F.R. §2550.404a-­1(b)(2); 29 C.F.R. §2550.404c-5 (Preamble); 29 C.F.R.§2509.08-1; §2509.96-1.
Case Law
Metzler v. Graham, 112 F.3d 207, 20 E.B.C. 2857 (5th Cir. 1997)
Other
Interpretive Bulletin 96­1, 29C.F.R. §2509.96­1; H.R. Report No. 1280, 93d Congress, 2d Session (1974); ERISA Opinion Letter 2006-08A (Oct. 3, 2008); Preamble to 29 C.F.R. §§2509, 2510, and 2550, 81 Fed. Reg. 20945 (Apr. 8, 2016); but see Chamber of Commerce v. U.S. Dep’t of Labor, 885 F.3d 360 (5th Cir.2018) (vacating final regulations) ;DOL Information Letter to Mark Iwry (October 23, 2014); DOL Advisory Council on Employee Welfare and Pension Benefit Plans Report on Participant Plan Transfers and Account Consolidation for the Advancement of Lifetime Plan Participation (November 2016).

Investment Advisers Act of 1940
§206

Case Law
SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963); In re David A. King and King Capital Corp., Investment Advisers Act Release No. 1391 (Nov. 9, 1933); In re George Sein Lin, Investment Advisers Act Release No. 1174 (June 19, 1989).
Other
Suitability of Investment Advice Provided by Investment Advisers, Investment Advisers Act Release No. 1406 (Mar. 16,1994).
The Value of Goals-Based Financial Planning by David Blanchett, CFP®, CFA. Journal of Financial Planning 28 (6): 42–50.

Uniform Prudent Investor Act [UPIA]
§2(a); §2(b); §2(c); §4; §6
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§7; §7(4) (Comments); §8;§10(b)

2.2 An appropriate risk level has been identified for the portfolio.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
2.2.1   The expected volatility of the portfolio is understood by the investment advisor and communicated to the client, and the quantitative and qualitative factors that were considered are documented.
2.2.2   “Large loss” scenarios have been identified and considered in establishing the portfolio’s risk level.
2.2.3   Expected disbursement obligations and contingency plans have been considered when establishing liquidity requirements for the portfolio and assessing the capacity to assume portfolio risk.
2.2.4   In the case of a defined contribution retirement plan, the investment options provide for a reasonable range of participant risk tolerance levels.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§402(b); §404(a)(1)(B);§404(a)(1)(C)

Regulations 
29 C.F.R. §2509.75-5, FR-20; 29 C.F.R. §2550.404a­-1(b)(1)(A); 29 C.F.R.§2550.404a-­1(b)(2); 29 C.F.R. 2550.404c-1 (Preamble)
Case Law
Laborers National Pension Fund v. Northern Trust Quantitative Advisors, Inc., 173 F.3d 313, 23 E.B.C. 1001 (5th Cir.), reh’g andreh’g en banc denied, 184 F.3d 820 (5th Cir.), cert. denied, 528 U.S. 967, 120 S. Ct. 406, 145 L. Ed. 2d 316 (1999); Metzler v. Graham,112 F.3d 207 (5th Cir. 1997); Chase v. Pevear, 383 Mass. 350, 419 N.E.2d 1358 (1981)
Other
DOL Advisory Council on Employee Welfare and Benefit Plans Report Hedge Funds and Private Equity Investments (November 2011)

Investment Advisers Act of 1940

Case Law
In re Westmark Financial Services Corp., Investment Advisers Act Release No. 1117 (May 16, 1988); In re George E. Brooks & Assocs., Inc.,Investment Advisers Act Release No. 1746 (Aug. 17, 1998)
Other
 Suitability of Investment Advice Provided by Investment Advisers, Investment Advisers Act Release No. 1406 (Mar. 16, 1994).

Uniform Prudent Investor Act [UPIA]
§2(a), (b), and (c); §2 Comments

Case Law
In the Matter of the Judicial Settlement of the Final Account of E. Barker, 801 N.Y.S. 2d 778 (2005), citing Matter of Rothko, 43 N.Y.2d 305 320 (1977)

Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§7; §8; §8 Comments 

2.3 The distribution of projected portfolio returns is evaluated in the context of the client’s risk and return objectives.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
2.3.1   The projected portfolio return is consistent with the client’s tolerance and capacity to assume volatility risk and investment goals and objectives.
2.3.2   Projected return assumptions for each asset class are based on reasonable risk-premium assumptions.
2.3.4   For defined contribution plans, the projected returns for pre-diversified options, such as target date funds or model portfolios, are based on reasonable risk/premium assumptions.
  Substantiation

Internal Revenue Code of 1986, as amended [IRC]

Other
IRS Notice 2014-66

Employee Retirement Income Security Act of 1974 [ERISA]
§3(34); §404(a)(1);§404(c) 

Regulations
29 C.F.R. §2550.404a­-1(b)(1)(A); 29 C.F.R. §2550.404a-­1(b)(2); 29 C.F.R. §2550.404c-1; 29 C.F.R. §2550.404c-5 (Preamble)
Case Law
Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591, 64 S. Ct. 281, 88 L. Ed. 333 (1944); Communications Satellite Corporation v. Federal Communications Commission, 611 F.2d 883(D.C. Cir. 1977); Katsaros v.Cody, 744F. 2d 270, 279 (2d Cir. 1984) (citing Marshall v. Glass/Metal Association, 507 F. Supp. 378, 384 (D. Hawaii 1980));Leigh v. Engle, 858 F.2d 361 (7th Cir. 1988); Jones v. O’Higgins, 11 EBC 1660 (N.D.N.Y. 1989); GIW Industries, Inc. v. Trevor, Stewart, Burton, & Jacobsen, Inc., 895 F.2d729 (11th Cir. 1990); GIW Industries, Inc. v. Trevor, Stewart, Burton, & Jacobsen, Inc., 895 F.2d 729 (11th Cir. 1990); Tennessee Gas Pipeline Company v. Federal Energy Regulatory Commission, 926 F.2d 1206 (D.C. Cir.1991);  Lanka v. O’Higgins, 810 F. Supp. 379 (N.D.N.Y. 1992);
Other
H.R.Rep. No. 1280, 93rd Cong., 2d Sess. 304 (1974), reprinted in 1974 U.S. Code Cong. & Admin. News 5038; Elton, Edwin J. and Gruber, Martin J., Modern Portfolio Theory and Investment Analysis (1995); DOL Interpretive Bulletin 96-1, Participant Investment Education. [29 C.F.R. §2509.96-1] 
Preamble to 29 C.F.R. §§2509, 2510, and 2550, 81 Fed. Reg. 20945 (Apr. 8, 2016); but see Chamber of Commerce v. U.S. Dep’t of Labor, 885 F.3d 360 (5th Cir. 2018) (vacating final regulations).
DOL Information Letter to Mark Iwry (Oct. 23, 2014)

Investment Advisers Act of 1940

Case Law
Jones Memorial Trust v. Tsai Inv. Services, Inc., 367 F. Supp. 491 (S.D.N.Y 1973); In the Matter of Alfred C. Rizzo, IA Release No. 897 (Jan. 11, 1984). 
Other Study on Investment Advisers and Broker-Dealers: As Required by Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (SEC, Jan. 21, 2011).  
Guidance Update: Robo-Advisers (SEC’s Division of Investment Management, Feb. 2017).
Investor Alert:Automated Investment Tools, (SEC and FINRA, May 8, 2015).

Uniform Prudent Investor Act [UPIA]
§2(a), (b), and (c); §2(c)comments; §3(b); §5

Case Law
Donahue v. Donahue, 2010 WL 481226 (Cap. App. 4 Dist.)

Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b) and (e)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§7; §7(4) (Comments); §8(a)(1)and (3); §8(b) 

2.4 Selected asset classes are consistent with the client’s time horizon and risk and return objectives.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
2.4.1   Asset classes are appropriately weighted to conform to the portfolio's specified time horizon and risk/return profile.
2.4.2   For participant-directed plans, selected asset classes provide each participant the ability to diversify their portfolio appropriately given their time horizon and risk/return profile.
2.4.3   The methodology and tools used to establish appropriate portfolio diversification are prudent and consistently applied.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§404(a)(1)(B); § 404(a)(1)(C)

Regulations
29 C.F.R. §2550.404a­1; 29 C.F.R. §2550.404a­1(b)(1)(A); 29 C.F.R. §2550.404a­1(b)(2)(B)(i­iii)
Case Law
Fifth Third Bank v. Dudenhoeffer, 134 S.Ct. 2459, 58 E.B.C. 1405 (2014); GIW Industries, Inc. v. Trevor, Stewart, Burton & Jacobsen, Inc., 895 F.2d 729 (11th Cir. 1990); Leigh v. Engle, 858 F.2d 361 (7th Cir. 1988); Liss v. Smith,991 F. Supp. 278, 301 (S.D.N.Y. 1998); Marshall v. Glass/Metal Ass'n and Glaziers and Glassworkers Pension Plan, 507 F.Supp. 378, 384 (D. Haw. 1980).
Other
Interpretive Bulletin 96-­1(d)(3), 29 C.F.R. §2509.96­1(d)(3); Joint Committee on Taxation, Overview of the Enforcement and Administration of the Employee Retirement Income Security Act of 1974, at 12 (JCX-16-90, June 6, 1990)

Investment Advisers Act of 1940

Case Law
People v.Goldsmith,86 N.Y.S. 2d 12 (1948)

Uniform Prudent Investor Act [UPIA]
§1(a); §2(a) and (b); §3
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3; §3(e)(4) comment
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§8(a)(2); §8(a)(2) comment;§7(1-3); §8 (b)

2.5 Selected asset classes are consistent with implementation and monitoring constraints.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
2.5.1   The Investment Advisor has the time, resources, knowledge and skills to implement and monitor all selected asset classes.
2.5.2   The process and tools used to implement and monitor investments in the selected asset classes are appropriate.
2.5.3   Appropriate investment products are accessible within each selected asset class.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§404(a)(1)

Regulation
29 C.F.R.§2550.404a-1(b);
Case Law
Fink v. National Savings and Trust Company, 772 F.2d 951, 957, 6 E.B.C. 2269 (DC Cir. 1985); Donovan v. Mazzola, 716 F.2d 1226, 4 E.B.C. 1865 (9th Cir. 1983); Morrissey v.Curran, 567 F.2d 546, 548-49 (2d Cir. 1977); Harley v. Minnesota Mining and Manufacturing Company, 42 F. Supp. 2d 898 (D. Minn. 1999); Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir. 1996); United States v. Mason Tenders Dist. Council of Greater New York, 909 F. Supp. 882, 886 (S.D.N.Y.1995); Trapani v. Consolidated Edison Employees Mutual Aid Society, 693F. Supp. 1509, 1516 (S.D.N.Y. 1988); Katsaros v. Cody, 744 F.2d 270 (2dCir.), cert. denied, 469 U.S. 1072 (1984); Donovan v. Mazzola,716 F.2d 1226 (9th Cir. 1983), cert. denied, 464 U.S. 1040 (1984); Leigh v. Engle, 727F.2d 113, 125-6 (7th Cir. 1984); Beck v. Pace International Union, 427 F.3d 668, 677 (9th Cir. 2005); In the Matter of the Judicial Settlement of the Intermediate and Supplemental Account of the JPMorgan Chase Bank, as Trustee of the Trust under Eighth (B) of the Last Will and Testament of Blanche D. Hunter, Deceased, 910 N.Y.S. 2d 405(2010); Laborers Nat’l. Pension Fund v. Northern Trust Quantitative Advisors, Inc., 173 F.3d 313 (5th Cir. 1999); Lanka v. O’Higgins, 810 F. Supp. 379(N.D.N.Y. 1992); Jones v. O’Higgins, 11 EBC 1660 (N.D.N.Y.1989); Katsaros v.Cody, 744 F. 2d 270, 279 (2d Cir. 1984) (citing Marshall v. Glass/Metal Association, 507 F. Supp. 378, 384 (D. Haw. 1980)).  

Other
H.R.Report No. 1280, 93rd Congress, 2d Sess.304, reprinted in 1974 U.S. Code Cong.& Admin. News 5038 (1974); DOL Advisory Council on Employee Welfare and Benefit Plans Report on Outsourcing Employee Benefit Plan Services, November 2014. 

Investment Advisers Act of 1940

Case Law
In the Matter of Kidder Peabody & Co., Inc., IA Release No. 232 (Oct. 16, 1968). 
Other
 Interpretive Release Concerning the Scope of Section 28(e) of the Securities Exchange Act of 1934 and Related Matters, ’34 Act Release No. 23170(Apr. 23, 1986).

Uniform Prudent Investor Act [UPIA]
§2; §2(a) comments; §2(f)comments; §4; §9(a)(1-3);

Other
Restatement of Trusts 3d: Prudent Investor Rule §227, comment

Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b) and (e); §5(a)(1)-(3)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a) and (b); §7(3); §7(3)comments; §8(a); §8(b); §10(2) 

2.6 The investment policy statement contains sufficient detail to define, implement, and monitor the portfolio’s investment strategy.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
2.6.1   The investment policy statement identifies the bodies of law governing the portfolio.
2.6.2   The investment policy statement defines the duties and responsibilities of all parties involved.
2.6.3   The investment policy statement specifies risk, return, and time horizon parameters.
2.6.4   The investment policy statement defines diversification and rebalancing guidelines consistent with risk, return, and time horizon parameters.
2.6.5   The investment policy statement defines the due diligence criteria for selecting investment options.
2.6.6   The investment policy statement defines procedures for controlling and accounting for investment expenses.
2.6.7   The investment policy statement defines monitoring criteria.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§402(a)(1); §402(b)(2);§402(c)(3); §403(a)(2); §404(a); §405(c)(1); §406(a)(1)(C); §408(b)(2)

Regulations
29 C.F.R. §2550.404a-­1(b)(1); §2550.404a-­1(b)(2); 29 C.F.R. §2550.408b-2
Case Law
In re Unisys Savings Plan Litigation, 74 F.3d 420, 19 E.B.C. 2393 (3rd Cir.), cert. denied, 510 U.S. 810, 117 S.Ct. 56, 136 L. Ed. 2d 19 (1996); Morrissey v. Curran, 567 F.2d 546, 1 E.B.C. 1659 (2nd Cir. 1977); Harley v. Minnesota Mining and Manufacturing Company, 42 F. Supp. 2d 898 (D. Minn. 1999), aff’d, 284 F.3d 901 (8th Cir.2002); Whitfield v. Cohen, 682 F. Supp. 188, 9 E.B.C. 1739 (S.D.N.Y.1988); Liss v. Smith, 991 F. Supp. 278 (S.D.N.Y. 1988); Leigh v. Engle, 858 F.2d 361, 10 E.B.C. 1041 (7th Cir. 1988), cert. denied, 489 U.S. 1078, 109 S. Ct. 1528, 103 L. Ed. 2d 833 (1989); GIW Industries, Inc.v. Trevor, Stewart, Burton, & Jacobsen, Inc., 895 F.2d 729 (11th Cir.1990); Laborers Nat’l. Pension Fund v.Northern Trust Quantitative Advisors, Inc., 173 F.3d 313 (5th Cir. 1999); Lanka v. O’Higgins, 810 F. Supp. 379 (N.D.N.Y. 1992); Jones v.O’Higgins, 11 EBC 1660 (N.D.N.Y. 1989); Katsaros v. Cody, 744 F. 2d 270, 279 (2d Cir. 1984)  
Other
Interpretive Bulletin 94­2, 29 C.F.R. §08-2; 29 C.F.R. § 2509-08(2); Interpretive Bulletin 75­8, 29 C.F.R. §2509.75-­8; H.R. Report No. 1280, 93rd Cong. 2d Sess. 304,reprinted in 1974 U.S. Code Cong. & Admin. News 5038 (1974); Interpretive Bulletin 96-1, Participant Investment Education. 29 C.F.R. §2509.96-1;Elton, Edwin J. and Gruber, Martin J., Modern Portfolio Theory and Investment Analysis (1995) 

Investment Advisers Act of 1940

Other
Suitability of Investment Advice Provided by Investment Advisers, Investment Advisers Act Release No. 1406 (Mar. 16, 1994).

Uniform Prudent Investor Act [UPIA]
§2 and Comments; §3 and Comments; §4; §7; §9(a)(1), (2) and (3)

Other
Restatement of Trusts 3d: Prudent Investor Rule §227(a) and §277; OCC Interpretive Letter No. 722 (March 12, 1996), citing the Restatement of Trusts 3d: Prudent Investor Rule §227, comment m (1992)

Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(c); §3(e); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a); §6(b)(2) and (3);§7(2), (3) and (5); §7(5) and Comments; §8 and Comments

Other
Restatement of Trusts 3d: Prudent Investor Rule§171 and §227, comment g 

3.1 A prudent due diligence process is followed to select each service provider.   Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
3.1.1   Prudent criteria are identified for each due diligence process used to select service providers.
3.1.2   The due diligence process used to select each service provider is documented.
3.1.3   Each due diligence process used to select service providers is consistently applied.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§402(a)(1); §402(b)(2);
§404(a)(1)(B); §405(c);§406(a); §408(b)(2)

Regulations
29 C.F.R. §2550.404a-­1(b)(1) and (2); 29 C.F.R. §2550.408b-2(c); 29 C.F.R.§2509.96-1; 29 C.F.R. §2509.75-8. 
Case Law
Howard v. Shay, 100 F.3d 1484, 20 E.B.C. 2097(9th Cir. 1996), cert. denied, 520 U.S. 1237, 117 S.Ct. 1838, 137 L. Ed.2d 1042 (1997); Fink v. National Savings and Trust Co., 772 F.2d 951(D.C. Cir. 1985); Katsaros v. Cody, 744 F.2d 270, 5 E.B.C. 1777 (2nd Cir.), cert. denied, 469 U.S. 1072, 105 S. Ct. 565, 83 L. Ed. 2d 506(1984); Donovan v. Mazzola, 716 F.2d 1226 (9th Cir. 1983), cert.denied, 464 U.S. 1040, 104 S. Ct. 704, 79 L.Ed. 2d 169 (1984); United States v. Mason Tenders Dist. Council of Greater New York, 909 F.Supp. 882,19 E.B.C. 1467 (S.D.N.Y. 1995); Trapani v. Consolidated Edison Employees’ Mutual Aid Society, 693 F. Supp. 1509 (S.D.N.Y. 1988); George v. Kraft Foods Global, Inc., 641 F. 3d 786 (7th Cir. 2011); Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009); 6:08-cv-03109-GAF (W.D. Mo. 2012); In the Matter of Rivas, 30 Misc. 3d 1207 (N.Y. Sur. 2011)
Other
DOL Field Assistance Bulletin 2007-01 (Feb. 2, 2007); DOL Information Letter,Qualified Plan Services (July 28, 1998); DOL Information Letter, Service Employees International Union (Feb. 19, 1998)

Investment Advisers Act of 1940
§206(1)-(2)

Case Law
 In the Matter of Eugene Bilotti, Investment Advisers Act Release No. 1689 (Dec.23, 1997); SEC v. Greenberg, Civ. Act. No. 1:11-cv-00313-JLK (D. Co. Feb. 11, 2011); In the Matter of Alfred C. Rizzo, Investment Advisers Act Release No. 897 (Jan. 11, 1984); In the Matter of Hennessee Group LLC and Charles J. Gradante, Investment Advisers Act Release No. 2871 (Apr. 22, 2009) 

Uniform Prudent Investor Act [UPIA]
§2(a); §2(c); §2(f); §7 and Comments; §9(a) (1), (2) and (3); 
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(c); §3(e); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a); §6(b)(1) and (2); §7;§8(a)(1) 

3.2 Statutory or regulatory investment safe harbors that are elected are implemented in compliance with the applicable provisions.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
3.2.1   Available safe harbors are evaluated to determine if any advance the best interests of the investors and/or beneficiaries.
3.2.2   When elected, safe harbor provisions are implemented in compliance with requirements.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(38); §402(c)(3);§404(a)(1)(B); §404(c); §405(c)(2); §405(d)(1); §408(b)(14); §408(g)(10)-(11)

Regulations
29 C.F.R.§2510.3-2f; 29 C.F.R. §2550.404a-­1; 29 C.F.R. §2550.404-2;29 C.F.R. §2550.404-3; 29 C.F.R. §2550.404-4; 29 C.F.R.§2550.404a-5; 29 C.F.R. §2550.404c-1; 29 C.F.R. §2550.404c-5; 29 C.F.R.§2550.408g-1 
Other
Interpretive Bulletin 75-­8, 29 C.F.R. §2509.75-­8 (FR­13-15, FR17Q); Interpretive Bulletin 08-02, 29 C.F.R. §2509.08-2; DOL Miscellaneous Document, Apr. 13, 1998 – Study of 401(k) Plan Fees and Expenses; Preamble to Investment Duties Regulation, 44 Fed. Reg.37,255 (June 26, 1979); Interpretative Bulletin 96-1(e), 29 C.F.R. §2509.96-1(e); Department of Labor Field Assistance Bulletin 2007-1 (Feb. 2,2007); DOL Advisory Opinion Letter 97-15A (May 22, 1997); DOL Advisory Opinion Letter 97-16A (May 23, 1997); TIAA Information Letter, Dec. 22, 2016.
Case Law
Tittle v. Enron Corp., 284 F. Supp. 2d 511, 578 (S.D. Texas 2003)

Investment Advisers Act of 1940
§203(e)(6); §206(3) (principal transactions)
Securities Exchange Act of 1934
§28(e)

Regulations
17 C.F.R. §275.202(a)(25); 17 C.F.R. §275.203(3)(6); 17 C.F.R. §275.206(4)-7; 17 C.F.R. §270.38a-1;
Case Law
Tittle v. Enron Corp., 284 F.Supp. 2d 511, 578(S.D. Texas 2003); In the Matter of Western Asset Management Co. and Legg Mason Fund Adviser, Inc., Investment Advisers Act Release IA-1980 (Sep. 28, 2001); In the Matter of Morgan Stanley Investment Management, Inc.,Investment Advisers Act Release No. 3315 (Nov. 16, 2011)
Other
Uniform Application for Investment Adviser Registration (Form ADV), Glossary, Item 42;Disclosure by Investment Advisers Regarding Soft Dollar Practices, Investment Advisers Act Release 1469 (Feb. 14, 1995); Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of 1934, Investment Advisers Act Release No.54165 (July 18, 2006) 

Uniform Prudent Investor Act [UPIA]
§9(a); §9(c)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§5(a); 5(c)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a); §6(b); §6(d) 

3.3 Decisions regarding investment strategies and types of investments are made in accordance with fiduciary obligations and are documented.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
3.3.1   A prudent due diligence process is used to select investment strategies, investment managers, and investments.
3.3.2   Decisions regarding the selection of investments consider both qualitative and quantitative criteria.
3.3.3   The due diligence process used to select investment strategies, investment managers, and investments is documented and consistently applied.
3.3.4   Regulated investments are preferred over unregulated investments when all other characteristics are comparable.
3.3.5   Investments that are covered by readily available data sources are preferred over similar investments for which limited coverage is available when all other characteristics are comparable.
3.3.6   A prudent due diligence process is used to make decisions regarding the use of proprietary versus non-proprietary products, and separately managed versus commingled accounts.
3.3.7   Decisions regarding rollover advice are made in accordance with fiduciary duties of loyalty and care.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§404(a)(1)(B); §404(a)(1)(C)

Regulations
29 C.F.R. §2550.404c­1(b)(3)(i)(C)
Case Law
Metzler v. Graham, 112 F.3d 207, 20 E.B.C.2857 (5th Cir. 1997); Marshall v. Glass/Metal Ass’n and Glaziers and Glassworkers Pension Plan, 507 F. Supp. 378 (D. Hawaii 1980); GIW Industries, Inc. v. Trevor, Stewart, Burton & Jacobsen, Inc., 10 E.B.C.2290 (S.D. Ga. 1989); aff’d, 895 F.2d 729 (11th Cir. 1990); Leigh v. Engle, 858 F.2d 361, 10 E.B.C. 1041 (7th Cir. 1988), cert. denied, 489 U.S. 1078, 109 S. Ct. 1528, 103 L. Ed. 2d 833 (1989)
Other
H.R.Report No. 1280, 93rd Congress, 2d Sess. (1974), reprinted in 1974 U.S. Code Cong. & Admin. News 5038 (1974); DOL Prohibited Transaction Exemption 77-4,42 Fed. Reg. 18732 (Apr. 8, 1977); DOL Advisory Opinion 1998-06A (July 30,1998); DOL Advisory Opinion 2003-09A (June 25, 2003); DOL Advisory Opinion 2005-23A (December 7, 2005); DOL Advisory Opinion 2006-06A (July 26,2006). 

Investment Advisers Act of 1940

Other

Risk Alert: Investment Adviser Due Diligence Processes for Selecting Alternative Investments (https://www.sec.gov/about/offices/.../adviser-due-diligence-alternative-investments.pdf)

Uniform Prudent Investor Act [UPIA]
§2(a); §3; §3 Comments
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(e)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§7(3); §8(a)(1) 

4.1 Periodic reviews compare investment performance against appropriate market and peer group benchmarks and overall portfolio objectives.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
4.1.1   Investment performance of the overall portfolio is compared against an appropriate benchmark and evaluated in the context of portfolio objectives.
4.1.2   The performance of each investment option is periodically compared against an appropriate market and peer group benchmark and any other performance-related due diligence criteria defined in the investment policy statement.
4.1.3   Underperforming investments are monitored and decisions to retain or replace investments are documented.
4.1.4   Rebalancing procedures are reasonable, documented, and consistently applied.
4.1.5   Investment performance is periodically reported to the client.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(38); §402(c)(3); §404(a);§405(c)(2)(A)(iii); §408(g) 

Case Law
Tibble v. Edison, Int’l, 135 S. Ct. 1823, 59 E.B.C. 2461 (2015), on remand 843 F.3d 1187 (9th Cir. 2016) and 2017 WL 3523737 (C.D.Cal. 2017); Tussey v. ABB, Inc.,52 E.B.C. 2826, 2012 WL 1113291 (W.D. Mo. 2012), aff’d in part 2014 WL 1044831(8th Cir. 2014) and 2017 WL 929202 (8th Cir. 2017); Leigh v. Engle, 727 F.2d 113, 4 E.B.C. 2702 (7th Cir. 1984); Atwood v. Burlington Indus. Equity, Inc., 18 E.B.C. 2009 (M.D.N.C. 1994))
Other
Interpretive Bulletin 75-­8, 29 C.F.R. §2509.75-­8 (FR­17); Interpretive Bulletin 08-2, 29 C.F.R. §2509.08-2; Interpretive Bulletin 2016-01, 29 C.F.R. §2509.2016-01; and DOL Field Assistance Bulletin 2018-01 (Apr. 23, 2018); DOL Tips for Selecting and Monitoring Service Providers (2005).

Investment Advisers Act of 1940

Case Law
SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963)
Other
Study on Investment Advisers and Broker-Dealers (SEC Staff, Jan. 21, 2011); Compliance Alert (June, 2007)

Uniform Prudent Investor Act [UPIA]
§2(a);§2(c); §9(a)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(e); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a); §6 (b)(1-­3);  §6(d); §6 Comments;  §8(b) 

4.2 Periodic reviews are made of qualitative and/or organizational changes of Investment Managers and other service providers.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
4.2.1   Periodic evaluations of the qualitative factors that may impact the results or reliability of Investment Managers are performed.
4.2.2   Negative news and other material information regarding an Investment Manager or other service provider are considered and acted on in a timely manner.
4.2.3   Deliberations and decisions regarding the retention or dismissal of Investment Managers and other service providers are documented.
4.2.4   Qualitative factors that may impact service providers are considered in the contract review process.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(38); §402(c)(3);§404(a)(1)(B)

Regulations
29 C.F.R. §2550.408b­2(d); 29 C.F.R. §2550.408c­2
Other
Interpretive Bulletin 75-­8, 29 C.F.R. §2509.75-­8 (FR17); Booklet: A Look at 401(k) Plan Fees, U.S. Department of Labor, Pension and Welfare Benefits Administration

Investment Advisers Act of 1940

Regulations
17 C.F.R. §275.206(4)-7

Case Law

In the Matter of Horter Investment Management, LLC Investment Advisers Act Release No. 4823 (December 8, 2017)

Other
Compliance Programs of Investment Companies and Investment Advisers, SEC Rel. IA-2204(Dec. 18, 2003)
Regulation of Investment Advisers, SEC Division of Investment Management (March 2013),Discussion of material disclosure, p. 23. Available at https://www.sec.gov/about/offices/oia/oia_investman/rplaze-042012.pdf.

Uniform Prudent Investor Act [UPIA]
§2(a); §7; §9(a)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b); §3(c); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(a) and (b)(1­3); §7(5) 

4.3 Procedures are in place to periodically review policies for trading practices and proxy voting.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
4.3.1   Procedures are in place to periodically review each investment manager’s policies for best execution.
4.3.3   Procedures are in place to periodically review each investment manager’s policies for proxy voting.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(38); §402(c)(3); §403(a)(1)and (2); §404(a)(1)(A) and (B)

Case Law
Herman v. Nations Bank Trust Co., (Georgia),126 F.3d 1354, 21 E.B.C. 2061 (11th Cir. 1997), reh’g denied, 135 F.3d 1409 (11th Cir.), cert. denied, 525 U.S. 816, 19 S.Ct. 54, 142 L.Ed.2d 42 (1998)
Other
Interpretive Bulletin 75-­8, 29 C.F.R. §2509.75-­8 (FR­17Q); Interpretive Bulletin 08-2, 29 C.F.R. §2509.08-2; DOL Prohibited Transaction Exemption 75-­1, Interim Exemption, 40 Fed. Reg. 5201 (Feb. 4, 1975); DOL Information Letter, Prescott Asset Management (1/17/92) (fn. 1); DOL Information Letter, Refco, Inc.(2/13/89); ERISA Technical Release 86-­1 (May 22, 1986)


Investment Advisers Act of 1940
§206(4);Securities Exchange Act of 1934 §28(e)

Regulation
17 C.F.R. §275.206(4)-6; 17 C.F.R. §275.206(4)-7
Case Law
In re Arleen W. Hughes, Act Rel. No. 4073, (Feb. 20, 1948);  In the Matter of Laurence I. Balter d/b/a Oracle Investment Research, SEC Investment Advisers Act Release No. 4545 (Oct. 4, 2016); In the Matter of Focus Point Solutions, Inc., Advisers Act Release No. 30196 (Sept. 6, 2012); In the Matter of KMS Fin. Servs., Inc., Advisers Act Release No. 4730 (July 19, 2017); In the Matter of Valor Capital Asset Management, LLC, SEC Investment Advisers Act Release No. 4864 (Mar. 6, 2018); In the Matter of John B. Engebretson, SEC Investment Advisers Act Release No. 4967 (July 12, 2018) 
Other
Securities Exchange Act Rel. No. 23170 (Apr. 23,1986); IAA Rel. No. 232 (Oct. 16, 1968); Charles Lerner, Esq., SEC No-Action Letter (July 25, 1990); IAA Rel. No. 2106 (Jan.31, 2003); Investment Company Act Rel. No. 25922 (Jan. 31, 2003); Salomon Bros., SEC No-Action Letter (May23, 1972)) Risk Alert: Most Frequent Best Execution Issues Cited in Adviser Exams (https://www.sec.gov/ocie/announcement/risk-alert-most-frequent-best-execution-issues-cited-adviser-exams-1) 


Uniform Prudent Investor Act [UPIA]
§2(a) and (d); §7; §9(a)


Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b), (c), and (e)(5); §5(a)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(2) and (3); § 7(2), (3),and (5); §8(a)(3)

4.4 Periodic reviews are conducted to ensure that investment-related fees, compensation and expenses are fair and reasonable for the services provided.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
4.4.1   A summary of all parties being compensated from client portfolios or from plan or trust assets and the amount of compensation has been documented.
4.4.2   Fees, compensation, and expenses paid from client portfolios or from plan or trust assets are periodically reviewed to ensure consistency with all applicable laws, regulations, policies and procedures and service agreements.
4.4.3   Procedures are in place to avoid or identify and appropriately address unreasonable fees.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§3(14)(B); §404(a)(1)(A), (B)and (D); §406(a); §408(b)(2)

Regulations
29 C.F.R. §2550.408(b)(2)
Case Law
Brock v. Robbins, 830 F.2d 640, 8 E.B.C. 2489 (7th Cir. 1987)
Other
Booklet:A Look at 401(k) Plan Fees, U.S. Department of Labor, Pension and Welfare Benefits Administration; DOL Advisory Opinion Letter 2001­-01A (1/18/01); DOL Advisory Opinion Letter (7/28/98) 1998 WL 1638072; DOL Advisory Opinion Letter 89-­28A (9/25/89) 1989 WL 435076; Interpretive Bulletin 75­-8, 29 C.F.R.§2509.75-­8 (FR­17Q); California Assembly Bill No. 1743(Chapter 668, Statutes of 2010), codified in scattered sections of the California Government Code; 11 CRR-NY 136-2.4(d); DOL Advisory Opinion 97-15A (May 22, 1997); DOL Advisory Opinion 97-16A (May 22, 1997)

Investment Advisers Act of 1940
§205(a)(1) Section 206(1) and Section 206(2) 

Regulations
17 C.F.R. §275.205-3; 17 C.F.R. § 275.206(4)-3
Case Law
SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963) In the Matter of Barclays Capital Inc.,Investment Advisers Act Release No. 4705 (May 10,2017); In the Matter of Morgan Stanley Smith Barney, LLC, Investment Advisers Act Release No. 4607 (Jan.13, 2017); In the Matter of Capital Dynamics, Inc., Investment Advisers Act Release No. 4746 (Aug. 16, 2017); In the Matter of Beverly Hills Wealth Management, LLC and Margaret Mulligan Black, aka Margaret Mulligan Scott, Investment Advisers Act Release No. 4975 (July 20, 2018).
Other
Bisys Fund Servs., Inc., SEC No-Action Letter (Sept. 2, 1999); SEC Investment Adviser Examination Manual (1980); Compliance Programs of Investment Companies and Investment Advisers, SEC Rel. No. IA-2017 (Feb. 5, 2003); Don P. Matheson & Co.¸ SEC No-Action Letter (May 15, 1976) Risk Alert: Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations ofInvestment Advisers (https://www.sec.gov/files/ocie-risk-alert-advisory-fee-expense-compliance.pdf)
State Securities Regulations
NASAA Unethical Business Practices Of Investment Advisers, Investment Adviser Representatives, And Federal Covered Advisers, Model Rule 102(a)(4)-1  Adopted 4/27/97, amended 4/18/04, 9/11/05    http://www.nasaa.org/content/Files/IAUnethical091105.pdf (August 2011)
NASAA Investment Adviser Representative Definition, Model Rule USA 2002 102(16), (Adopted Sept. 17, 2008), http://www.nasaa.org/wp-content/uploads/2011/08/33-IA-Rules_General_USA2002.pdf

Uniform Prudent Investor Act [UPIA]
§2(a); §7 and Comments; §9, Comments

Case Law
Matter of Derek W. Bryant, 188 Misc. 2d 462, 729 NYS 2d309 (6/21/01)
Other
McKinneys EPTL11¬2.3(d)

Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(a)(, (b), and (c); §5(a) and (c)(1)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§6(b)(2) and (3); §7(2) and (5); §7, Comments

4.5 There is a process to periodically review the organization’s effectiveness in meeting its fiduciary responsibilities.  Show Detail   Hide Detail   Show Substantiation   Hide Substantiation Conformity
Detail
4.5.1   Fiduciary assessments are conducted at planned intervals to determine whether appropriate policies and procedures are in place to address all fiduciary obligations and that such policies and procedures are effectively implemented and maintained.
4.5.2   The investment policy statement is reviewed at least annually to ensure it is aligned with current facts and circumstances.
  Substantiation

Employee Retirement Income Security Act of 1974 [ERISA]
§404(a)(1)(B)

Case Law
Fink v. National Savings & Trust Co., 772 F.2d 951, 957 (D.C. Cir. 1985); Liss v. Smith, 991 F.Supp. 278, 299­300 (S.D.N.Y.,1998); Harley v. Minnesota Mining and Manufacturing Company, 42 F.Supp. 2d 898, 906 (D. Minn. 1999)
Other
Department of Labor Employee Benefits Security Administration, “Meeting Your Fiduciary Responsibilities” (May 2004); 29 C.F.R. 2509.75-­8; 29 C.F.R. 2509.08-2; 17 C.F.R. § 275.206(4)­7; DOL Field Assistance Bulletin 2007-­01.

Investment Advisers Act of 1940

Regulation
17 C.F.R. §275.206(4)-7)
Case Law
In the Matter of Trust & Investment Advisors, Inc., Larry K. Pitts, and George M. Prugh, InvestmentAdvisers Act Release No. 4087 (May 18, 2015); In the Matter of Institutional Investor Advisers, Inc.Investment Advisers Act Release No. 4824 (Dec. 8, 2017).

Uniform Prudent Investor Act [UPIA]
§2(a); §2(d)
Uniform Prudent Management of Institutional Funds Act [UPMIFA]
§3(b) and (c)
Model Management of Public Employee Retirement Systems Act [MMPERSA]
§8(b); §7
 
The approach used to structure these Practices is modeled after that used by the International Organization for Standardization (ISO). Recently, the financial services community has begun to recognize the value of certification of conformity to standards. An ISO standard for financial planning (ISO 22222) exists and investment performance reporting practices can be certified to Global Investment Performance Standards (GIPS). In 2006, the Centre for Fiduciary Excellence (CEFEX) was formed to certify conformity with the practices covered in the Prudent Practices for Investment Fiduciaries handbook series. Fi360 is a founding member of CEFEX. 

SECTION 4 - ASSESSMENT CONCLUSIONS AND RECOMMENDATION

 

Based on the findings obtained during the Assessment, the Company is in substantial conformity to the Standard, and is recommended for CEFEX registration.

This assessment has been reviewed by the CEFEX Registration Committee to maintain impartiality and consistency in the registration process. For details on the complete assessment process, please visit www.cefex.org

 

Note to Report

 

The information contained in this report is a summary of an assessment conducted by CEFEX, Centre for Fiduciary Excellence, LLC and is valid for 1 year from the Date of Registration shown. The report is suitable for public distribution at the discretion of the certified firm. To confirm the registration of this firm, please visit www.cefex.org , where a listing of all currently registered firms can be viewed. For any questions related to this report, please contact CEFEX at admin@cefex.org.