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News November 8, 2004 Issue

OCIE Areas of Focus

"Themes" that OCIE is focusing on, according to OCIE general counsel John Walsh: undisclosed payments, undisclosed conflicts of interest, pricing practices, trading practices, and sales practice problems.

Walsh, speaking at the NSCP conference, urged advisers to think broadly about risk issues. "Donít just say ĎThe SEC is now looking at this narrowly-defined problem, and weíre okay on that narrowly-defined problemí," he said. Instead, he said, advisers should be thinking more broadly, along the lines of "Where are our conflicts of interest? Do we have any undisclosed payments?"

For example, he said, organizations should consider whether they are making "secret" payments of any kind, whether to vendors, service providers, or other parties. "Thatís an issue you really need to be looking at," he said. "Thatís an area of risk."

One experienced CCO at a mid-sized East Coast advisory firm told IM Insight that recently, she has been thinking about eliminating activities that give rise to conflicts entirely, rather than relying on disclosure to "cure" the conflict, as might have been done in the past. She also cited increasing reliance on conflicts checklists.