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Apr 2012
April 17, 2012

New SEC Exam-Related Guidance Available

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has made publicly available on OCIE’s webpage two new resources providing guidance about changes in its objectives, operations, as well as trends in examination deficiencies:
National Exam Program Overview.  This 45 page internally-generated SEC report describes OCIE’s “self-assessment” and related changes in its strategy, structure, people, process, training and technology improvements in its examination program to address, among other things, the Dodd-Frank Act’s redesign of investment adviser regulation.

The report includes a description of OCIE’s inspection process (Part II) and a summary of recent enforcement actions against investment advisers (Part I).  Current IA, BD, and investment company compliance issues and 2012 examination priorities are highlighted in Part III of the report.

OCIE has established an Office of Risk Assessment and Surveillance to evaluate risks, both in markets and in registrants.  New risk-assessment tools have been developed and more training is being provided to IA examiners.  Other exam program improvements are described, including a new alignment of OCIE’s national exam program leadership.  OCIE expects to issue more Investor Risk Alerts and sweep examination reports in 2012.

National IA Compliance Outreach Program.  This day-long webcast can now be watched for free at your convenience on the SEC’s website.  The program aired on January 31, 2012, and its agenda included these topics:

Compliance and Enterprise Risk Management
  • How risk management and compliance intersect
  • How CCOs can engage operational units
  • Documenting, reporting, and attesting to control activities
Trading Practices
  • Risk management – insider trading issues
  • Protecting confidential investment information from misuse
  • Using expert networks, affiliations, relationships, and consultants
  • Using Alpha capture systems
  • Aligning risks to identify:
-   Potential insider trading (Section 204a) issues
-   Misuse of material non-public information
-   Insider trading
  • Control Activities – detection tools
Dodd-Frank Wall Street Reform and Consumer Protection Act
  • Rules implementing the Dodd-Frank IA amendments
  • Transition of mid-sized advisers to state registration
  • Private fund advisers – registration and/or reporting
  • Collaboration with other regulators
Enforcement-related matters
  • SEC Enforcement Division’s Asset Management Unit
  • Enforcement trends and lessons
  • Enforcement against CCOs
  • National exam program changes
Safety and Soundness of Client Assets/Custody
  • Lessons learned under the SEC’s Custody Rule
  • Asset verification within the national exam program
  • Terminated funds and funds-of-funds custody issues
In 2011, the OCIE hosted the CCOutreach Broker-Dealer Program addressing a wide range of broker-dealer compliance topics.  A recording of that webcast is available on the SEC’s website.  These materials could be useful in planning your firm’s next continuing education program.

Should you have any questions about these new SEC resources, please do not hesitate to contact any member of the WN&J Broker-Dealer and Investment Adviser Practice Group.

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