The SEC has announced its schedule for the upcoming Compliance Outreach Program regional seminars to be held in Chicago, New York, Atlanta and San Francisco. Investment adviser and investment company senior officers, including chief compliance officers (CCOs) are invited to register and attend. The first meeting will occur in Chicago on August 28.
This years’ Compliance Outreach Program, which started off in Boston in May, will likely include panel discussions with SEC staff from the Office of Compliance Inspections and Examinations (OCIE), Division of Investment Management, and Division of Enforcement’s Asset Management Unit. Topics will vary depending on location. For example, the Chicago seminar will address traded and non-traded real estate investment trusts, investment companies with special emphasis on alternative investment funds and money market funds, and current enforcement actions in the investment management industry. The New York seminar will focus more on newly registered investment advisers, dual registrants and to investment advisers affiliated broker-dealers, and will topics like the SEC’s examination process, priorities, risk surveillance, and examination selection process.
As we’ve alerted our audience in previous blogs, investment advisers should attend these meetings because “[t]he seminars highlight areas of focus for compliance professionals. They provide an opportunity for the SEC staff to identify common issues found in related examinations or investigations and discuss industry practices, including how compliance professionals have addressed such matters.”
Registration information about the regional seminars is available at:
It’s a New Year! And for advisers it’s again time for a new year’s resolution, only this kind of resolution is not voluntary. Like holidays, it comes once a year, and while the responsibility for it falls on the adviser, the obligation to “administer” (or the commitment to follow our new year’s theme) falls on the Chief Compliance Officer – it’s called the Annual Compliance Review. Further, consider it the type of resolution made mandatory by Rule 206-4(7) of the Investment Advisers Act of 1940 known as the “Compliance Rule.”
This new year’s “resolution” requires advisers and their CCOs not simply to resolve that they will do better with compliance than last year, but requires them actually to adopt and implement written policies and procedures reasonably designed to prevent a violation of the federal securities laws, and to evaluate their adequacy and effectiveness.
With this in mind, as CCO what have you resolved to do this year? As the SEC’s Final Rule clearly mandated, will your annual review of 2011, at a minimum, address the adequacy of your policies and procedures in the following areas:
- Portfolio management processes, including allocation of investment opportunities among clients and consistency of portfolios with clients’ investment objectives, disclosures by the adviser, and applicable regulatory restrictions;
- Trading practices, including procedures by which the adviser satisfies its best execution obligation, uses client brokerage to obtain research and other services (“soft dollar arrangements”), and allocates aggregated trades among clients;
- Proprietary trading of the adviser and personal trading activities of supervised persons;
- The accuracy of disclosures made to investors, clients, and regulators, including account statements and advertisements;
- Safeguarding of client assets from conversion or inappropriate use by advisory personnel;
- The accurate creation of required records and their maintenance in a manner that secures them from unauthorized alteration or use and protects them from untimely destruction;
- Marketing advisory services, including the use of solicitors;
- Processes to value client holdings and assess fees based on those valuations;
- Safeguards for the privacy protection of client records and information; and
- Business continuity plans.
After considering those questions, among others, will advisers resolve in the new year to test 2011 to determine whether they have (i) met regulatory deadlines? (ii) conducted a risk assessment to determine any unique compliance risk exposure to its business?(iii) determined whether compliance procedures needed to be changed to better reflect the adviser’s business practices? (Obsolete procedures or programs that the firm cannot follow should be repealed) (iv) conducted adequate transactional, forensic or periodic tests of its procedures and programs in the areas mentioned in the Final Rule? (In both speeches and its own seminars, the SEC has made clear the importance of proper testing); and (v) adequately documented the annual review? The SEC examination staff will ask advisers for documentation of their annual compliance review. Further, Investment Advisers Act Rule 204-2(17)(ii) and Investment Company Act Rule 38a-1(d)(3) to preserve records documenting the annual review.
When looking back on your annual compliance review for 2011, what resolutions/changes or enhancements will you be making?
For next year, the SEC has announced it will be enhancing its CCO Outreach program to include both chief compliance officers and senior personnel of investment advisers and investment companies will. The program will occur on Jan. 31, 2012, at the SEC’s Washington D.C. headquarters and will also be webcast. By adding senior personnel, the SEC says the change is aimed at emphasizing the need for compliance awareness at all levels of an organization. Program topics will include compliance and enterprise risk management, trading, custody, Dodd-Frank reform and enforcement issues.
Registration materials and other information about the national seminar are
available at: http://www.sec.gov/info/complianceoutreach/complianceoutreachns2012.htm.