Peter B. Driscoll, Acting Director, Office of Compliance Inspections and Examinations recently gave a speech on improving investment adviser compliance.
The position of chief compliance officer of a registered investment adviser has always carried with it the risk of personal liability. Being an outsourced CCO is even more perilous.
As stated in the recent SEC Risk Alert, the 4 most frequent compliance issues identified in examinations of investment advisers are as follows:
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:
Congratulations to the team at Digital Compliance and the launch of their very first compliance app – CCO Companion. We are proud to be the sole content provider for all of CCO Companion’s original compliance material. We believe, and from early … Continued
With the SEC’s greater emphasis on risk-based exams, SEC examiners’ primary focus is on an adviser’s controls and procedures. As such, they will perform an evaluation of the effectiveness of those controls. Where those controls are found to be weak and ineffective, or … Continued
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 … Continued
“Forensic testing” is certainly the buzzword in compliance circles. Think CSI: Crime Scene Investigation. Essentially, an adviser should conduct some type of transactional or quality control tests that will assist the adviser in determining whether its activities are consistent with … Continued
Lest you think the SEC is not serious about holding individuals personally liable, here is an excerpt from a recent speech by Chairperson White: Individual Liability: Any discussion of strong enforcement tools must include a discussion of our priority of … Continued
The SEC recently conducted examinations of around 20 SEC-registered investment advisers and investment companies that outsourced their CCOs to unaffiliated third parties. The general takeaway is that outsourced CCOs sometimes were not knowledgeable about a firm’s business practices, did not have access to … Continued
Busy schedules and deadlines can make shortcuts seem appealing. But the work we complete and how we complete it matters.
The SEC has made it clear time and time again that the first step toward developing strong written policies and procedures is for an investment adviser to identify all areas that create risk exposure or the potential for risk exposure. Accordingly, … Continued
The SEC Office of Compliance Inspections and Examinations encourages advisory firms to define what a material compliance event is for their organization. While there as many definitions as there are advisory firms, a common definition of a “Material Compliance Event” is … Continued
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 … Continued
In a recent speech an SEC official said that the presence of robust, effective compliance programs would allow companies to reap significant credit in their dealings with regulators. He spoke about the ways the SEC supports compliance and ethics programs. … Continued
Transactional Tests Transactional tests (also known as quality control tests) are compliance tests that are conducted contemporaneously with the activity in question and are used to detect deviations of actual transactions from firm policies or regulatory standards. Examples of transactional … Continued
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 … Continued
Dear Compliance Professional, In the first installment of this series on the annual review process, we learned that the primary goals of the annual review are to determine the adequacy and effectiveness of your policies and procedures in light of your firm’s businesses, advisory services, … Continued
Dear Compliance Professional, Advisers Act Rule 206(4)-7 (commonly referred to as the Compliance Rule) requires SEC-registered investment advisers to conduct an annual review of the adequacy and effectiveness of their policies and procedures. Many states have also, either expressly or implicitly, … Continued
As part of the examination process, the SEC will meet with senior management to discuss how each firm identifies and mitigates conflicts of interest and legal, compliance, financial, and operational risks. This initiative is designed to: (i) evaluate firms’ control … Continued