As part of its National Exam Program, the SEC’s Office of Compliance and Examinations (“OCIE”) has just mailed a letter to senior executives and Chief Compliance Officers of newly-registered investment advisers apprising them of what practices they can expect to be examined.
While the letter primarily concerns risk-based exams of advisers to private funds that registered with the SEC after July 21, 2011, the significance the OCIE examination staff is attaching to certain adviser practices in these so-called “Presence Exams” should be weighed by all advisers regardless – whether they’re new or a private fund. As we have discussed these and other areas of exam focus in previous posts, OCIE’s hot areas referenced, and set for review, include:
- Marketing materials;
- Portfolio management;
- Conflicts of interest;
- Safety of Client Assets; and
- Valuation of Client holdings and assessment of fees based on valuations.
Through the SEC’s lens, each of these topics is being viewed in three phases: engagement; examination; and reporting.