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Topic: Examinations and OCIE

Examiners Will Check on Supervision of Employees with Disciplinary History

July 26, 2019
The SEC is not saying that firms canít hire someone with a disciplinary history Ė but it is requiring that advisers take steps to ensure that such persons are supervised correctly and that necessary policies and procedures are in place. Failure to do so is likely to result in, at a minimum, examination deficiencies.

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OCIE Director on Anti-Money Laundering, Cybersecurity, Customer Funds

June 14, 2019
What do SEC examinations involving anti-money laundering, cybersecurity and protection of customer funds have in common? Examination efforts in these areas are examples of the agency protecting retail investors. So said SEC Office of Compliance Inspections and Examinations Director Peter Driscoll, who recently addressed the SIFMA Operations Conference in Boca Raton, FL.

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SEC Scrutiny of Privacy Policies and Procedures Makes Implementation Essential

June 7, 2019
With SEC examiners increasing their scrutiny of how advisory firms protect privacy, now is the time for chief compliance officers to ensure that privacy policies and procedures not only exist, but are robustly implemented. The result will not only be an advisory firm with high confidence that private information is protected, but that its firmís privacy practices will pass muster the next time examiners come to visit.

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SEC Issues Risk Alert on Electronic Customer Records and Information Storage

May 31, 2019
The SECís Office of Compliance Inspections and Examinations, in its latest Risk Alert, lets advisers and broker-dealers know what examiners will be looking for when scrutinizing how they safeguard customer records and information in network storage. How firms work with third-party security will also be part of their visits.

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OCIE Director: CCOs Not Ultimately Responsible for Success of Compliance Programs

May 10, 2019
Itís the reassurance that many chief compliance officers want to hear. While SEC officials have provided that reassurance before, they really canít go overboard in confirming the following: CCOs, while key professionals for compliance success, do not bear the ultimate responsibility if a compliance program fails. Many will be pleased to know that a top SEC official recently reinforced this message.

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Think Twice Before Providing Deficiency Letters to Clients

May 10, 2019
A new client, or one of many years, phones you with a request: I understand your advisory firm was recently examined, would you please send me a copy of the deficiency letter? Consider carefully before fulfilling that request Ė doing so may cause you more problems than it is worth.

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Regulation S-P: OCIE Puts Advisers and Broker-Dealers on Notice

April 19, 2019
At least some advisers and broker-dealers are not complying with privacy notice and safeguard policy requirements under Regulation S-P, and the SECís Office of Compliance Inspections and Examinations, in an April 16 Risk Alert, lets all advisers and brokers know that examiners are keeping a sharp eye out for such violations. In short, it is saying: Youíve been warned, so donít complain if you get cited for such violations during an exam.

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SEC Expects a Drop in Adviser Examinations in FY 2019

March 29, 2019
Advisory firms fearing an exam from the SECís Office of Compliance Inspections and Examinations this year might have cause to breathe a little easier. While there is a new cybersecurity exam underway (see story this issue), overall, the SEC is predicting a drop in the percentage of advisers it will examine in fiscal year 2019, following several years of increases.

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Third OCIE Cybersecurity Exam Sweep Underway

March 29, 2019
The SECís Office of Compliance Inspections and Examinations isnít letting the grass grow under its feet when it comes to advisory firms and cybersecurity. Having completed two cybersecurity exam sweeps in recent years, OCIE has now begun a third Ė this time focusing on large branch office networks and firms that have merged with or acquired other firms.

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OCIE Exam Priorities List is a Tool, Not a Compliance Blueprint

February 8, 2019
New chief compliance officers at small firms, as well as compliance professionals of all sizes of firms, should avoid the trap of regarding the SECís annual examination priority list as a template for their own compliance programs. The priority list, published by the agencyís Office of Compliance Inspections and Examinations (OCIE), is a valuable tool for compliance efforts, but those efforts need to address topics in addition to those highlighted in the list.

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Electronic Messaging: OCIE Wants Advisers to Adopt Better Controls

December 21, 2018
Use of social media, texts and other types of electronic messaging, as well as employment of mobile and personal devices, count as business communications as much as email or paper documents. Advisers must establish proper policies and procedures, train employees, provide supervisory review and establish control over such communications and the devices used.

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SEC Issues 2019 Examination Priorities

December 21, 2018
The SEC had a holiday present for advisers this year. It released its 2019 examination priorities on December 20 rather than in January or February of the new year, as it has done in the past. The priorities listed are not that much different from the 2018 priorities, although digital assets is given more prominent play.

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Percentage of Advisers Examined Jumps 11 Percent

November 30, 2018
The percentage of investment advisers examined in fiscal year 2018 by the SECís Office of Compliance Inspections and Examinations increased to 17 percent from the 15 percent examined the year before Ė representing an 11 percent increase in the number of advisers examined, according to the agency. In doing so, OCIE surpassed its FY 2018 goal of holding steady at the 15 percent figure.

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Examiners Will Target Certain Types of Mutual Funds, ETFs and Their Advisers

November 16, 2018
The SECís examination arm is getting the word out about perceived fund and adviser risk areas. Just eight days after issuing a risk alert in regard to advisers and the Cash Solicitation Rule, it has issued another risk alert on risk-based examinations focusing on mutual funds, exchange-traded funds and their advisers.

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OCIE Reveals Most Common Cash Solicitation Rule Deficiencies

November 9, 2018
SECís Office of Compliance Inspections and Examinations wants advisers to know the violations its examiners are finding when they visit advisory firms. In recent months, it has issued Risk Alerts highlighting the most common deficiencies cited involving best execution, fees and expenses, and more. Its latest Risk Alert focuses on adviser compliance issues related to Advisers Act Rule 206(4)-3, the Cash Solicitation Rule.

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Get the Most from the Exam Postmortem

October 26, 2018
SEC examiners may visit an adviser for anywhere from one to multiple days. Most advisers will see their visits end with a number of deficiencies found, a few lucky ones will escape with no deficiencies found at all, and a very few unlucky ones will learn that they have been referred to the SECís Division of Enforcement. Whatever the outcome of an examination, wise advisory firms will conduct an internal postmortem of the exam experience and lessons learned.

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OCIE Reveals Most Common Best Execution Deficiencies Found by Examiners

July 27, 2018
Wouldnít it be great to know what examiners expect to find Ė and, as a result, will be looking for Ė when they visit? In the area of best execution, at least, that is no longer a mystery. The SECís Office of Compliance Inspections and Examinations on July 11 released a risk alert containing "the most common deficiencies associated with advisersí best execution obligations identified by OCIE staff."

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Fees and Expenses: OCIE Wants Advisers to Focus on the Nuts and Bolts

April 20, 2018
Sometimes itís the basic things that get overlooked, like fees and expenses. When that happens in the asset management community, problems occur and examiners notice Ė which may be why the SECís Office of Compliance Inspections and Examinations this month issued a Risk Alert offering an "Overview of the Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations of Investment Advisers." Chief compliance officers would be wise to pay attention.

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Exam Referrals to Enforcement: How Much Should Advisers Worry?

April 13, 2018
Itís every advisory firmís nightmare. SEC examiners visit, find some deficiencies and suggest some corrective actions, which the adviser makes. Some months later, the advisory firm learns that it is the subject of a Division of Enforcement investigation, based on a referral from the exam team.

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OCIE Expects to Maintain 15 Percent Adviser Exam Rate in 2018 and 2019

March 9, 2018
The SECís Office of Compliance Inspections and Examinations achieved a historic rise when examiners visited 15 percent of advisory firms in fiscal year 2017, up from 11 percent the year before. It expects this rate to hold steady through the next two fiscal years, according to its annual performance report.

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