The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations has hired 130 new examiners over the last 18 months with expertise in areas including hedge funds and derivatives, said OCIE Director Carlo di Florio at a recent conference.
Di Florio (left) also warned chief compliance officers that the SEC is focusing on three “priority” areas when it comes to advisory firms: fiduciary responsibility in the retail sale of complex structured products; due diligence practices; and custody arrangements that may signal fraud.
As the SEC takes on oversight of hedge fund and private fund advisors, both must register with the agency by March 30, di Florio told CCOs at the Investment Adviser Association’s recent compliance conference that in overseeing these new registrants, the SEC will first share regulatory guidance with them.
After that, di Florio said, the OCIE will conduct coordinated exams and look at target areas, then OCIE will issue follow-up guidance after the exams to alert private fund advisors to the “challenges we are seeing and provide guidance to help them strengthen their compliance.”
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Registration of hedge fund and private fund advisors has drawn criticism from inside and outside of the agency. SEC Commissioner Daniel Gallagher told CCOs at the same conference that he sees cases where the securities regulator can grant exemptive relief for private fund advisors that must register with the agency as mandated by Dodd-Frank.