Additional Highlights From the IAA Compliance Workshop
Some additional items of interest from the October 26 Investment Adviser Association compliance workshop in Washington, DC:
Annual review results. According to OCIE associate director Gene Gohlke, the first annual review process seems to have gone smoothly, at least from SEC examinersí perspective. "We actually did not find many significant issues with the annual reviews that firms did, which I think is good," said Gohlke. "By and large, firms did something that they called an annual review." However, he said that some firms seemed to have conducted their entire annual review in one day. "We really question if you can really do everything that I think should be done as part of the annual review in a single day, particularly when during the course of the year nothing else is really being done to determine whether the policies and procedures, or compliance processes, are adequate to address the risks."
Gohlke also reported that OCIE is working on systematically compiling the types of issues that were found in its reviews of advisersí and fundsí annual reviews, so that it can better inform the Division of Investment Management staff as well as the Commission of its findings. The results of OCIEís annual review assessments, he said, likely will be discussed during the first panel at the November 14 CCOutreach National Seminar.
Active cross-trade relief is in the works. The "Advisory Council on Employee Welfare and Pension Benefit Plansí Working Group on Plan Asset Rules, Exemptions and Cross Trading" is holding a meeting this week to discuss possible regulatory changes to the active cross trade exemption contained in the Pension Protection Act. "Weíre hoping there will be some more relief," said IAA assistant general counsel Valerie Baruch. The group has asked DOL to lower the Actís $100 million threshold and/or provide relief for pooled funds.
OCIE is working on deficiency letters. Gohlke said that OCIE is working on "some sort of a template of suggested language" for deficiency letters "so that thereís more consistency [in] how things are cited and in terms of the severity of which they are conveyed." IAA general counsel Karen Barr reported that her group met with representatives of OCIE on October 24 to discuss concerns about the deficiency letters. "We were very heartened by their response," said Barr. "They do seem to be taking it seriously." During the meeting, said Barr, OCIE representatives discussed their efforts to develop model language for examiners to use in describing applicable legal standards.
AML rule for advisers. "Itís not dead, but itís dormant," said Barr. She said that the rule is not expected in 2006. When the rule is eventually adopted, she said, advisers "will have at least six months to comply with it."