The Office of Compliance and Inspections ("OCIE") within the US Securities and Exchange Commission continues to issue valuable "risk alerts" summarizing the findings of recent regulatory inspections. The OCIE's most recent release focuses on asset manager compliance programs. Inadequate compliance resources, insufficient authority of the Chief Compliance Officer, failure of asset managers to actually do what the written compliance policies said...yep, the SEC found all that.
The OCIE's release "Investment Adviser Compliance Programs" (available here) outlines a list of compliance deficiencies identified by the SEC - and, of course, relevant to the scope of investor due diligence programs.
The key issues noted by the regulator are:
Inadequate Compliance Resources
Insufficient Authority of CCOs
Annual Review Deficiencies
Implementing Actions Required by Written Policies and Policies (so walk the walk, not just talk the talk...)
Maintain Accurate and Complete Policies and Procedures
"The staff observed adviser's policies and procedures that contained outdated or inaccurate information about the adviser, including off the shelf policies and contained unrelated or incomplete information."
Maintain Reasonably Designed Written Policies and Procedures
Finally, the OCIE has identified numerous areas where asset managers have failed to establish adequate compliance policies, resulting in a list of potential weaknesses, including:
Overall, where are the SEC going? Some key themes:
As always, plenty of topics for operational due diligence!
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