Compliance Solutions for Investment Advisers

Category Archives: SEC Examinations

3 Ways to Reduce Potential SEC Penalties

One day you might find yourself in a situation where you have discovered – through the normal operation of your compliance policies and procedures or through your compliance testing – that your advisory firm has come up short in some significant manner. Depending on the severity of the problem (i.e., level of client harm) your firm may

5 Most Frequent Compliance Topics Identified in Investment Adviser Exams

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) identified the following five areas of compliance deficiencies or weaknesses frequently found during its staff’s examinations of SEC-registered investment advisers:

SEC 2017 Examination Priorities

The SEC’s Office of Compliance Inspections and Examinations has published its examination priorities for 2017. The priorities focus on electronic investment advice, money market funds, and financial exploitation of senior investors. In addition, the priorities “reflect a continuing focus on protecting retail investors, including individuals investing for their retirement, and assessing market-wide risks.” Click here for a

Common Compliance Deficiencies – Failure to Disclose

An investment adviser has a fiduciary duty to act in the best interests of its clients. A central tenant of this duty is full and fair disclosure of all material facts to clients. What you tell your clients about your business – and whether you conduct your business consistent with the disclosures you make to

SEC Audits – Expect the Unexpected

As most of you know (and dread) the SEC sends out a document request list about two weeks prior to the on-site portion of the audit. However, be prepared to provide other documents on the fly. For example, examiners have been known to request changes made to the adviser’s web site for the past 12

Undisclosed Compensation Arrangements

Such arrangements may include, among others, undisclosed solicitation arrangements. It is not uncommon to have a discussion with a client about whether they can pay a certain person for client referrals. Often they cannot because the person is not qualified to act as a solicitor (e.g., they are not appropriately registered nor do they fit

An Ounce of (Compliance) Prevention

The enforcement staff gives credit to registrants that demonstrate effective compliance programs and a genuine commitment to ethical principles.  Advisers should focus on persuading the enforcement staff of the quality and depth of a firm’s compliance culture and its record of ethical conduct at the outset of an investigation, rather than discussing compliance programs during

5 Exam Focus Areas for New Advisers

The SEC has been engaging in shorter, more streamlined “presence exams” for newly registered advisers.  The following five focus areas make up the bulk of these exams: Marketing; Portfolio management; Conflicts of interest; Safety of client assets; and Valuation.  Streamlined though they may be, these focus areas still cover a lot of territory.

SEC Exam Priorities – Cybersecurity

As part of its 2015 exam priorities, the Office of Compliance Inspections and Examinations (OCIE) cited their continued focus on cybersecurity issues. If you remember back, in April of 2014 OCIE issued a Risk Alert detailing its initiative to assess cybersecurity preparedness.  OCIE’s cybersecurity initiative was designed to assess cybersecurity preparedness in the securities industry and to

7 Ways to Prepare for a SEC Exam

Make sure your compliance program and its implementation are up to par; Know if you have custody and make sure you have satisfied any attendant requirements; Conduct a through risk assessment; Establish a culture of compliance at the top of your advisory firm; Be disciplined in your record keeping; Conduct compliance testing to find the

Common ADV Deficiencies

Regulatory examiners always look for inconsistencies between an advisory firm’s Form ADV Part 1 and Part 2. In fact, inconsistencies between these documents is one of the leading deficiencies found by SEC and state examiners during a regulatory audit. The problem lies in the fact that there is overlap in the information called for in


I was reviewing some of the more interesting and relevant SEC Enforcement cases and came across the cherry-picking scheme of J.S. Oliver Capital Management, a San Diego-based investment adviser, and its President, Ian Mausner. According to the SEC complaint, they engaged in a cherry-picking scheme that awarded more profitable trades to hedge funds in which Mausner

Risk Assessment Process

Dear Compliance Professional, As part of the examination process, the SEC meets with senior management to discuss how each advisory firm identifies and mitigates conflicts of interest and legal, compliance, financial, and operational risks. This initiative is designed to: (i) evaluate firms’ control environment and “tone at the top,” (ii) understand firms’ approach to conflict

Important Lessons for SEC Advisers

Sometimes investment advisers busted by the SEC for intentional actions can offer lessons for their more law-abiding brethren. Two actions against investment advisers and certain of their executives are a case in point. One firm allegedly engaged in thousands of principal transactions through an affiliated brokerage firm without informing their clients. The other firm and

SEC Exam Initiative

Dear Compliance Professional, The SEC today announced that its Office of Compliance Inspections and Examinations (OCIE) is launching an initiative directed at investment advisers that have never been examined, focusing on those that have been registered with the SEC for three or more years.  OCIE previously announced that examining these advisers is a priority in 2014. As

SEC Exams – Update #2

During this recent spate of exams, the SEC is really drilling down on custody.

SEC Exam Priorities – Update

Dear Compliance Professional, As part of its 2014 Exam priorities, the SEC announced that the “staff will utilize a number of strategies to conduct focused, risk-based examinations of the adviser population that has been registered for more than three years but has not yet been examined . . .” The SEC also announced that the

SEC 2014 Exam Priorities

Dear Compliance Professional, The Securities and Exchange Commission today announced its examination priorities for 2014, which cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents. “We are publishing these priorities to highlight areas

SEC Examiner Faces Criminal Charges

From the Financial Times: A veteran examiner with the Securities and Exchange Commission faces criminal charges for filing false government ethics forms over his ownership of bank stocks in violation of agency rules. Steven Gilchrist, a SEC examiner since 1996, was arrested on Tuesday morning on three counts of making false statements to the government.

SEC Advisers to Pay User Fees?

The recommendation of the Investor as Purchaser Subcommittee: “The SEC should request legislation from Congress that would authorize its Office of Compliance, Inspections, and Examinations (OCIE) to impose “user fees” on SEC-registered investment advisers, the revenue from which could be retained by the Commission to fund an enhanced investment adviser examination program including more frequent