OCIE Issues Alert Regarding Compliance Issues Related to Best Execution by Investment Advisers


On July 11, 2018, the Office of Compliance Inspections and Examinations (“OCIE“) of the Securities and Exchange Commission issued a Risk Alert regarding the most frequent best execution issues cited in adviser exams “to provide investment advisers (“advisers“), investors and other market participants with information concerning many of the most common deficiencies that the staff has cited in recent examinations of advisers’ compliance with their best execution obligations under the Investment Advisers Act of 1940.”

The following is a summary list of the examples provided by OCIE of the most common deficiencies associated with advisers’ best execution obligations.

  • Not performing best execution reviews.
  • Not considering materially relevant factors during best execution reviews.
  • Not seeking comparisons from other broker-dealers.
  • Not fully disclosing best execution practices.
  • Not disclosing soft dollar arrangements.
  • Not properly administering mixed use allocations.
  • Inadequate policies and procedures relating to best execution.
  • Not following best execution policies and procedures.

According to OCIE, the examinations within the scope of this review resulted in a range of actions, including advisers electing to amend their disclosures regarding best execution or soft dollar arrangements, revising their compliance policies and procedures, or otherwise changing their practices regarding best execution or soft dollar arrangements. To read the full text, click here.