Office of Compliance Inspections and Examinations of the Securities Exchange Commission (OCIE)

SEC Staff Observation from Examinations of Investment Advisers

Posted on

 

On July 23, the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) published a Risk Alert on its “Observations from Examinations of Investment Advisers: Compliance, Supervision, and Disclosure of Conflicts of Interest.” The purpose of this Risk Alert is to raise awareness of certain compliance issues that OCIE observed by sharing the Staff’s observations from these examinations. The Risk Alert provides a good summary of the Staff’s observations across a broad range of compliance topics, but emphasized its specific observations relating to employees or prospective employees with disciplinary histories. As stated by the Staff: “the key takeaway is that OCIE encourages advisers, when designing and implementing their compliance and supervision frameworks, to consider the risks presented by hiring and employing supervised persons with disciplinary histories and adopt policies and procedures to address those risks.” Risk Alert.

Office of Compliance Inspections and Examinations Issues Risk Alert on the Five Most Frequent Compliance Topics Identified in Examinations of Investment Advisers

Posted on

 

On February 7, 2017, the Office of Compliance Inspections and Examinations of the Securities and Exchange Commission (OCIE) published a Risk Alert listing of the five compliance topics most frequently identified in deficiency letters that were sent to SEC‑registered investment advisers (“Advisers“) during the past two years. Within each of these topics, a few examples of typical deficiencies were discussed to highlight the risks and issues that examiners commonly identified.

The five compliance topics addressed in this Risk Alert are deficiencies or weaknesses involving: (i) Rule 206(4)-7 (the Compliance Rule) under the Investment Advisers Act of 1940 (the Advisers Act); (ii) required regulatory filings; (iii) Rule 206(4)-2 under the Advisers Act (the Custody Rule); (iv) Rule 204A-1 under the Advisers Act (the Code of Ethics Rule); and (v) Rule 204-2 under the Advisers Act (the Books and Records Rule). The Staff emphasized that: “Advisers should review their compliance programs and practices in light of the topics noted in this Risk Alert.”

Although the list of deficiencies and weaknesses was based upon examinations of SEC‑registered investment advisers, these findings also should be considered as regulatory guidance by “exempt reporting advisers,” particularly those whose business is anticipated to grow beyond the scope of the exemption on which they are relying; for example, the failure to adopt and maintain a Code of Ethics (an obligation applicable to all investment advisers, whether or not registered), the failure to adopt compliance manuals that are reasonably tailored to the Adviser’s business practices, the failure of Advisers to follow their compliance manual policies and procedures, and the failure of Advisers to maintain accurate books and records with regard to their investment adviser business, including typical accounting and other business records. Press Release.