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March 08, 2012 at 08:20 AM
Chief compliance officers received a number of stern warnings on Thursday during the Investment Adviser Association’s annual compliance conference in Arlington, Va., just outside Washington.
Robert Plaze, deputy director of the Securities and Exchange Commission’s Division of Investment Management, warned CCOs during the conference that the newly created Asset Management Unit that’s housed within the SEC’s Division of Enforcement “is dedicated to suing you.”
This unit of the enforcement division, he said, is staffed by people who understand the asset management business and collaborates with not only the investment management division but also with the agency’s Office of Compliance Inspections and Examinations. The Asset Management Unit has “made a really big difference in how effective” the SEC’s oversight of advisors is, Plaze said, and the unit will be able to help the SEC to perform “more effective exams.”
Plaze added that while advisors can expect “more knowledgeable” examiners to come knocking on their doors, he doesn’t foresee an uptick in the number of exams being performed. But the SEC examiners of today, he said, are benefiting from the SEC’s upgraded information technology, which allows them to prepare themselves for exams.
Eileen Rominger, director of the Division of Investment Management, told attendees that the Asset Management Unit is making sure that advisory firms have adopted written compliance policies and procedures, noting three recent cases of firms who failed to do so even after being warned by SEC examiners. “Ignoring an SEC exam warning can result in an enforcment action,” she said. And the enforcement division “may act even without incidence of fraud.”
But before SEC examiners come knocking, Tom Giachetti (left), chairman of the Securities Practice Group at the law firm Stark & Stark, said firms must ensure they have a qualified CCO in place. The CCO’s role has been elevated, and firms should treat their CCO as a “principal of the firm,” he said. The “CCO should be involved in every facet in the firm’s” activities.
