Its the reassurance that many chief compliance officers want to hear. While SEC officials have provided that reassurance before, they really cant 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.
Chief compliance officers should make every effort to review disclosures from their firms to the SEC, investors and others, even if those disclosures already have the blessing of top management. Failure to do so may leave the door open to potential fraud.
Compliance and chief compliance officers are not just for show. Advisers that name CCOs but then fail to give them responsibility for administering their firms written compliance policies and procedures may be called out by the agency for doing just that - as one advisory firm found out.
New chief compliance officers at small firms, as well as compliance professionals of all sizes of firms, should avoid the trap of regarding the SECs annual examination priority list as a template for their own compliance programs. The priority list, published by the agencys 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.
Its no secret that advisory firms need to monitor employee communications as part of their firms compliance efforts. Its also no secret that advisers must make every effort to protect employees personally identifiable information (PII). How can advisers meet one priority without violating the other?
The Investment Adviser Association is concerned that the scope and breadth of the proposed 2020 Global Investment Performance Standards (GIPS) may make compliance with GIPS more difficult. It urged the CFA Institute in a recent comment letter to address this and other issues, including that the proposed standards take into account local regulation and the voluntary nature of GIPS.
With the past year almost over and a new one about to begin, its time to take a look back and take stock of what was accomplished in 2018 and what issues remain. The past 12 months found major developments involving standards of care for advisers and broker-dealers, the emergence of an SEC strategy regarding cryptocurrencies, a full year in office for a new SEC team and philosophy, the rising challenges of cybersecurity, and more.
Every year at this time, advisory firms and their employees take a fresh look at their gift and entertainment policies to ensure that there are no compliance problems and that everyone knows what is expected. While many employees are aware of their firms dollar limits for receiving or giving gifts, there is another issue that draws less attention: employee attendance at holiday parties thrown by clients, prospective clients, vendors or other third parties.
The SEC this month reached a settlement with a former advisory firm over allegations that it failed to perform adequate due diligence and monitoring of key investments. Much of the paperwork in the settlement, as well as in a separate settlement with the advisers former chief executive officer involving compliance issues, focused on allegations that the firm hired an inexperienced chief compliance officer and then repeatedly refused to provide him with the compliance resources he requested.
Advisers need to step up their game in terms of overseeing their sub-advisers. SEC examiners are scrutinizing the relationships between advisers and sub-advisers for conflicts of interest and to ensure that advisers are properly on top of what their sub-advisers are doing.