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The Markets Quarterly Review (Through 9/30/19)

The third quarter was full of ups and downs for stocks, much like the second quarter. Stock values moved in response to the rhetoric from the participants in the trade war between the United States and China. The Federal Reserve lowered interest rates two times during the quarter. More new jobs were added, but at a reduced rate, while wage growth continued. Manufacturing and industrial production remain muted, influenced, in part, by the waning global economy. Nevertheless, consumers were undaunted by economic developments, spending at a steady rate throughout the quarter.


July kicked off the third quarter in a somewhat lackluster manner, as the benchmark indexes listed here posted gains over June’s respective closing values. The Nasdaq gained over 2.0% for the month, followed by the S&P 500, which rose 1.31%. The Dow and Russell 2000 inched ahead by less than one percent, while the Global Dow dipped by almost half a percent. The Federal Open Market Committee reduced short-term interest rates 25 basis points, which sent stocks reeling. However, strong corporate earnings reports, low unemployment, and higher wages helped ease investors’ concerns by the end of the month.

did you know? recently completed a survey of advisor viewpoints on compliance and regulation compared to 2017 results. While concerns of the DOL fiduciary rule have faded, threats in cybersecurity, data integrity and social media have all become increasing priorities. Here are a few of the findings:

  • Compliance costs have increased an average of 8% in the past year.
  • Cybersecuity is the #1 compliance task that has commanded the largest share of efforts this past year for 69% of those surveyed, up from 54% in 2017.
  • Data integrity, fraud and social media/electronic communications continue to be the top compliance concerns.
  • Social media, ant-money laundering and senior investor abuse/fraud have each had notable increases in compliance efforts since 2017.

bright ideas
‘Tis the Season for Annual Compliance Reviews
Best Practices for Company Risk Assessments

With Q4 upon us, time is running out to complete your annual compliance reviews on your firm if you have not already done so in 2019. Just as annual reviews can be a great opportunity to reconnect with clients and reassess what’s working, what’s not, risks and opportunities, the same can be said for this review process for your business.

Rule 206(4)-7  requires an investment advisory firm to

  1. Adopt and implement written compliance policies and procedures
  2. Perform an annual review
  3. Designate a Chief Compliance Officer (CCO)

While at first glance, this long-standing rule appears rather straight forward, it continues to trip up investment advisers leading to enforcement actions. By using and developing a risk assessment reflective of your company, your CCO should go through your policies and procedures to identify the biggest business risks from a macro level each year. The goals of this risk assessment process are to ask what risks may be present for the firm, if adequate controls are in place to manage or mitigate these risks and document any modifications that have been made for potential audits.

Conducting a Risk Assessment on Your Firm
Back in 2007, the SEC provided the following 12 points in a Risk Inventory Guide as recommendations for areas you should reviewing and documenting at least on an annual basis as a part of this risk assessment process:

  1. Marketing and performance
  2. Form ADV and disclosure
  3. Invoice and fees
  4. IPO offerings
  5. Soft dollar kickbacks
  6. Compensation
  7. Objective restrictions
  8. Trade ticket items
  9. Trade execution
  10. Non-public information
  11. Personal and proprietary trading and
  12. Cashier and monies and securities being moved to or from a client from a brokerage account

Some additional emerging areas you may consider as part of your risk assessment:

  • Books and records maintenance
  • Proxy voting
  • Branch office supervision
  • Disaster recovery / business continuity plan (BCP)
  • Cybersecurity
  • Business continuity
  • Social media usage

Team Compliance Meeting
In addition to the CCO completing these audits, it is advisable to host a meeting with employees at least annually to discuss any relevant regulatory changes and reinforce a firm culture of compliance. Explain an overview of compliance responsibilities that impact team members, any notable updates to your ADV and similar. You may also create a more frequent compliance calendar to meet with the team on a quarterly or monthly basis to address individual topics of concern in more detail. Keeping a record of this meeting agenda and any handouts will also be beneficial, along with signed copies of attestation statements from each employee completing these trainings.

Monitoring and Archiving Communications
As you know, you must maintain a system that monitors and archives all employee emails. A few additional tips to audit for potential compliance concerns would be to randomly select 1-2 employees each week and review a full week of correspondence for any potential concerns. Or complete a keyword search for all employees on a periodic basis for red flag words such as:

  • Guaranteed
  • Free
  • Win-win
  • Fraud
  • Lawsuit
  • Abuse

Social media usage has also continued to increase across our industry in recent years, despite the lack of modern advertising guidance from the SEC since 1961. If you are using social media for your firm, you should have a policy in your policies and procedures to address it and a system in place for monitoring and archiving activity, while avoiding actions that could be conceived as endorsements or testimonials.

Have questions?
As always, our team at Beacon is here to help. Be sure to visit our Advisor Toolbox for additional resources, or contact your wholesaler today. 

beacon news

Beacon Capital Management has been named as one of the “Best Entrepreneurial Companies in America” by Entrepreneur  magazine’s Entrepreneur360™ ranking, a premier study recognized well-rounded companies that has mastered a balance of impact, innovation, growth leadership and value.

Be sure to visit Beacon’s News & Press page for the latest credibility pieces to share with your clients and prospects, and follow Beacon on LinkedIn for the latest updates as they happen.


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For Advisor Use Only, Not to Be Used With Clients

The GIPS Compliant Presentations for our Vantage portfolios can be obtained by clicking on the below link.  If you would like the Compliant Presentations to be emailed directly via PDF file or if you would like to receive a copy of Beacon’s Composite Descriptions; please respond to this email or contact Beacon at 937-439-9093.

BCM 2017 Compliant Presentations

Beacon Capital Management, Inc. is a registered investment adviser with the Securities and Exchange Commission. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.

Additional information about Beacon Capital Management is also available on the SEC’s website at under CRD number 120641. Beacon Capital Management only transacts business in states where it is properly registered, notice filed, or excluded or exempted from registration or notice filing requirements.

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Beacon Capital Management

7777 Washington Village Drive, Suite 280, Dayton, OH 45459

P: 866.439.9093 | F: 937.424.4825