- SEC Announces Intention to Examine Advisers Never Before Examined
- March 6, 2014 | Authors: Peter D. Fetzer; Terry D. Nelson
- Law Firms: Foley & Lardner LLP - Milwaukee Office ; Foley & Lardner LLP - Madison Office
On February 20, 2014, the SEC announced that the Office of Compliance Inspections and Examinations (OCIE) would launch an examination initiative zeroing in on investment advisers that have never been the subject of an OCIE examination and have been registered with the SEC for at least three years.
Letters were sent on February 20, 2014 to those advisers who will be the focus of the examination initiative explaining that the adviser may be examined and highlighting the subject areas that will be examined.
The initiative to examine the never before examined registrants, according to the SEC, includes two distinct examination approaches, risk-assessment and focused reviews. The risk assessment approach would include a high-level review of the adviser’s business activities, and more specific focus on the adviser’s compliance program and other records necessary to support the statements made in the adviser’s disclosure documents. The focused review approach will include a comprehensive examination of various high-risk areas of the business and operations of the adviser who is selected for this type of review.
The high-risk areas which may be the primary focus of the focused review examination include: (i) the adviser’s compliance program and whether it is adequate to cover all of the material advisory services of the adviser; (ii) filings and disclosures made by the adviser with the SEC and to clients; (iii) marketing materials utilized by the adviser; (iv) portfolio management practices; and (v) safety of client assets.
The SEC’s recent letter to the targeted advisers describes the examination process and various resources it provides in order to assist registered advisers to prepare for an examination and otherwise to be in compliance with the requirements under the Advisers Act.