The Five Most Frequent Compliance Topics Identified in OCIE Examinations of Investment Advisers

February 15, 2017

OCIe published another of its Risk Alerts.  This one focuses on investment adviser compliance.

The five topics identified are:

  1. Compliance manuals---tailoring to adviser's needs; need to update; annual reviews mandatory and need to address adequacy of the policies and procedures; and not adhering to the policies and procedures
  2. Regulatory filings---need to update ADVs; file form PF and form D; inaccurate disclosures in those forms
  3. Adviser custody---advisers need to comply with the custody rule; issues re:  on-line account access; failure to have surprise audits by an independent accountant; failure to recognize adviser has custody
  4. Code of ethics rule---access persons not identified; codes missing required information; untimely collection of holdings and transaction information; failure to describe the code of ethics in advisers' ADVs
  5. Books and records---failure to keep required books and records at all or inaccurately and untimely; inconsistencies in recordkeeping

Implications for Advisers

  • Manuals must be tailored to each adviser's needs and operations
  • Policies and procedures are evergreen---set-up a schedule for reviews and updates
  • Staff compliance function sufficiently with properly qualified staff

As usual, the SEC staff note that lapses and failures in these areas have resulted in enforcement actions.

Reference materials:

SEC OCIE Risk Alert:

Dechert memo discussing the Risk Alert