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News November 28, 2011 Issue

di Florio Says Enforcement Staff Aren’t Embedded in OCIE Exams

Should you worry that your SEC examination team is just a cover for snooping by the Division of Enforcement?

Not at all, said OCIE director Carlo di Florio. Contrary to what you may have heard, Enforcement staff does not Ė as a rule Ė participate in OCIE examinations.

di Florio made his remarks at the Regulatory Compliance Associationís Asset Management Thought Leadership Symposium in New York earlier this month. Enforcement staff will join OCIE examinations for training purposes, and will participate as part of an exam team when fraud or investor harm is suspected, said di Florio. However, Enforcement staff do not regularly accompany exam staff as part of the SEC examination process.

OCIE routinely invites SEC staff from other divisions to join examinations for training purposes, said di Florio. Specialized staff from across the SEC also may participate in an OCIE exam to ensure that OCIE has an accurate understanding of a firmís business. Quantitative or high frequency trading businesses are good examples of the need for specialized expertise, he said. Adding specialists to an exam team allows for peer-to-peer communications and a faster, more accurate assessment of a firmís operations, risks, and disclosures.

Specialists may also improve exam efficiencies and make them less burdensome for registrants, said di Florio.

di Florio noted that new private fund adviser registrants that use complex strategies will be of particular interest to OCIE, especially with respect to hidden or poorly disclosed risks. He stressed that private fund information produced during an examination would be kept confidential by the staff.