The Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) released its selected 2015 examination priorities for investment advisers, broker-dealers and transfer agents. Click here to view.
Category Archives: SEC Inspection
SEC Examination Focus on Investment Adviser “Dual Registrants”
August 19, 2014
Earlier this year the Securities and Exchange Commission (“SEC”) National Exam Program (“NEP”) published its Examinations Priorities for 2014. “Dual Registrants” was listed as one of the most significant initiatives across the entire NEP. This is the second year in a row that the NEP has referenced dually registered investment advisers and broker-dealers in its published examination priorities. This focus does not only apply to firms that have both a broker-dealer registration and an investment adviser registration but it extends to any investment adviser firm whose representatives are also licensed as representatives with a broker-dealer. The 2014 release indicates that, “The convergence among broker-dealer and investment adviser representative activity continues to be a significant risk. For example, representatives of dual registrants, i.e., registrants that are both broker-dealers and investment advisers, and affiliated advisers and broker-dealers may influence whether a customer establishes a brokerage or investment advisory account. This influence may create a risk that customers are placed in an inappropriate account type that increases revenue to the firm and may not provide a corresponding benefit to the customer.”
SEC Examination Priorities for 2014
February 19, 2014
On January 9, 2014, the Office of Compliance Inspections and Examinations (“OCIE”) National Examination Program (“NEP”) of the U.S. Securities and Exchange Commission (“SEC”) published its examination priorities for 2014. This report is published to “communicate with investors and registrants about areas the that the staff perceives to have heightened risk and to support the [SEC] mission to protect investors; to maintain fair, orderly, and efficient markets; and to facilitate capital formation.”
Over the past year, we have written several articles warning investment advisers to prepare for regulatory examinations as both the U.S. Securities and Exchange Commission (“SEC”) and state securities regulators have indicated that investment advisers should expect to see an increase in the number of exams being conducted. RIA Compliance Consultants is seeing the effects of more frequent investment adviser exams. Lately, we have experienced an increase in the number of calls from clients and prospective clients because they have recently been trough an SEC or state investment adviser exam or have been notified by an SEC or state securities regulator that their investment advisers will be audited in the near future. One of the most common inquiries we are receiving is regarding what we can do to assist with preparing or updating the investment adviser’s written policies and procedures. Too often, we are hearing that, although the investment adviser has been registered for some time, the investment adviser does not have customized written supervisory policies and procedures or has not properly maintained current and customized policies and procedures.
As Regulators Prepare to Conduct More Examinations, Registered Investment Advisers Should Make Sure They are Prepared
May 29, 2013
Registered investment advisers must make sure that they have strong compliance programs in place and they are prepared for regulatory examinations as regulators expect to increase the number of examinations being conducted. In recent testimony before the U.S. House of Representatives Committee on Financial Services, Chairman Mary Jo White of the U.S. Securities and Exchange Commission (“SEC”) discussed some of the recent activities of the SEC. The testimony addressed several key areas of SEC oversight and focus including the areas of SEC enforcement and the SEC’s inspection and examination program. During the testimony, Chairman White stated, “the [SEC] needs to further strengthen the enforcement and examination functions of the SEC. Strong enforcement of the securities laws is necessary for investor confidence and is essential to the integrity of our financial markets. Successful enforcement actions result in sanctions that deter and punish wrongdoing and protect investors, both now and in the future. Similarly, our National Examination Program is critical to improving compliance by regulated entities, preventing and detecting fraud, and monitoring market risks.”
On February 21, 2013, the U.S. Securities and Exchange Commission (“SEC”) released its examination priorities for 2013 for the National Examination Program (“NEP”) of the Office of Compliance Inspections and Examinations. The release states that the NEP published these examination priorities to communicate with investors and SEC registered investment advisers about areas that are perceived by NEP staff to have heightened risk, and to support the SEC’s mission “…to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The 2013 examination priorities “…are aligned with the SEC’s mission by seeking to improve compliance, prevent fraud, inform policy, and monitor firm-wide and systemic risk.”
NASAA Releases Statement on SRO Bill
May 04, 2012
Jack Herstein, the president of the North American Securities Administrators Association (“NASAA”) and Assistant Director of the Nebraska Department of Banking and Finance’s Bureau of Securities, has released a statement regarding the Investment Adviser Oversight Act of 2012, recently introduced by Rep. Spencer Bachus, the Chairman of the U.S. House Financial Services Committee.
Rep. Spencer Bachus, the Chairman of the House Financial Services Committee, and Rep. Carolyn McCarthy have introduced a bill, the Investment Advisers Oversight Act of 2012, which would create a self-regulatory organization (“SRO”) for investment advisers.
By now, registered investment advisors affected by the changes to Rule 203A-5 under the Investment Advisers Act of 1940 (“Rule 203A-5”), mid-sized investment advisor firms (firms with assets under management between $25 million and $100 million), should have begun the process of switching from registration with the U.S. Securities and Exchange Commission (“SEC”) to state registration. Mid-sized advisor firms making the switch must keep in mind that filing the Form ADV Part 1 amendment and submitting an application for registration with the appropriate state regulatory agencies is just the first step in the process of making the switch from SEC to state registration. A registered investment advisor must familiarize itself with the regulatory requirements of the SEC or state securities regulators, as applicable, and make sure that appropriate procedures are in place for complying with these requirements. For a mid-sized advisor this will mean reviewing and making sure that it is complying with the appropriate state rules and regulations versus those of the SEC.
Investment Advisers Should Expect More Frequent Regulatory Exams
September 13, 2011
With the upcoming regulatory switch of mid-sized investment advisers from the U.S. Securities and Exchange Commission (“SEC”) to state securities regulators and Congress considering whether to authorize a self-regulatory organization (“SRO”) for investment advisers, we believe that the frequency of investment adviser examinations is going to rise.
