The SEC’s Office of Compliance Inspections and Examinations this past week issued risk alerts specifying what examiners may look at when they visit advisory firms and broker-dealers to check on compliance with Form CRS and Regulation Best Interest. With the SEC now clear that the June 30 compliance date for both requirements will not be changed (ACA Insight, 4/6/20), firms – already dealing with the problems created by the coronavirus – will need to make sure they are in compliance, applicable with these new rules.
The SEC’s Office of Compliance Inspections and Examinations (OCIE) will be doing most of its examinations remotely in the weeks ahead, at least until the coronavirus passes. Advisory firms and investment companies that expected onsite visits should now expect greater use of audio and video interviews as the agency seeks to continue its mission.
The SEC regards information security as a key risk and its examiners have made it a top priority since the issue rose to prominence more than eight years ago. Now, through its Office of Compliance Inspections and Examinations, the agency has released a comprehensive list of industry practices that OCIE staff have observed. While carefully making clear that these are not required practices, the release leaves little doubt that examiners will keep these in mind when visiting registrants.
The SEC’s Office of Compliance Inspections and Examinations released its 2020 Examinations Priorities, and while many of the topics were the same as in past years, the new list includes checking into firms’ compliance with its recently adopted Standards of Conduct, including Regulation Best Interest, Form CRS, and interpretation of an adviser’s fiduciary duty. Cybersecurity, digital assets, conflicts of interest and compliance programs also made the list.
The SEC must sometimes regard its Office of the Inspector General as a relentless cop, always on its tail to find either things it is not doing right or challenges it must meet - perhaps not unlike some advisers and broker-dealers may feel about the SEC itself. Just weeks after issuing a report critical of the agency's time management controls (ACA Insight, 9/30/19), the SEC's internal watchdog has now raised, among other things, its examination coverage of investment advisers and the timeliness of its enforcement investigations.
The SECs Office of Compliance Inspections and Examinations, in a September 4 Risk Alert, lets advisers know the most frequent principal trading and agency cross-transaction compliance issues that examiners observed – and therefore what firms can expect examiners to make a point of looking at during future visits. Specifically, the Risk Alert focuses on compliance […]
The SEC is not saying that firms cant hire someone with a disciplinary history - 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.
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.
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 firms privacy practices will pass muster the next time examiners come to visit.