SEC OCIE Letter on National Exam Program Initiative

On October 9, the SEC’s Office of Compliance Inspections and Examinations (OCIE) sent letters of introduction addressed to the Senior Executives of newly-registered advisers to private funds as part of their nationwide outreach announcing a new initiative under the National Exam Program, in which OCIE will be conducting “focused, risk-based examinations of advisers to private funds.” 

Under this initiative, the exam staff will review one or more high-risk areas of a private fund adviser, which could include marketing materials, conflicts of interest in the portfolio management process, such as investment and trade allocations, safety of client assets in the context of the Advisers Act custody rule, and valuation policies and procedures, especially with regard to illiquid or difficult to value instruments.  As with all OCIE exams, the outcome of the exam could include no findings, an “examination summary letter” of compliance deficiencies, or a referral to the SEC’s Division of Enforcement or another regulator, such as FINRA or a state.  SEC OCIE Letter.