Observations from SEC OCIE’s Examinations of Investment Advisers

Supervision, Compliance and Multiple Branch Offices

What just happened?

On November 9, 2020 the U.S. Securities and Exchange Commission’s (SEC) Office of Compliance Inspections and Examinations (OCIE) issued a risk alert discussing compliance issues and deficiencies observed from its recent exams.

OCIE re-emphasized that firms should consider their own unique circumstances, risks and challenges when they have a business model that includes numerous branches that are geographically dispersed, and to adopt policies and procedures to address those risks and challenges.

What does this mean?

OCIE Staff commented on common findings listed below from their Multi-Branch Initiative:

Compliance and Supervision
OCIE staff observed particular deficiencies related to policies and procedures that were:

  • Inaccurate and/or outdated
  • Not applied consistently in all branch offices
  • Inadequately implemented
  • Not enforced

OCIE staff observed that advisers did not have policies and procedures that adequately addressed:

  • Custody of client assets
  • Fees and expenses
  • Oversight and supervision of supervised persons
  • Advertising
  • Code of Ethics

OCIE observed several areas of Investment Advice that were deficient:

  • Oversight of, or reasonable basis for, investment recommendation
  • Mutual fund share class selection and disclosure issues
  • Wrap fee programs
  • Rebalancing issues
  • Conflict of interest disclosures
  • Trading and allocation of investment opportunities

What should you do?

Contact us now if any of these deficiencies apply to your firm and need help updating compliance policies and procedures.