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SEC’s Risk Chief to Target Hedge Funds With Exams

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The Securities and Exchange Commission plans to launch exams targeting hedge funds, Peter Driscoll, head of the new Office of Risk and Strategy, said Friday.

Driscoll said at the Investment Adviser Association’s annual compliance conference in Washington that private equity funds and private fund advisors would “continue to be a big focus” for the exam unit as well this year, adding that the focus on hedge funds will zero in on such areas as portfolio management trading and back-office operations.

The SEC conducted “presence exams” of private fund advisors through FY 2014. Since then, OCIE has continued to examine private fund advisors, though not through the presence exam initiative. Private fund advisor exams, however, were also listed in the SEC’s exam priorities list for 2016.

Driscoll declined to elaborate to ThinkAdvisor after his remarks on the hedge fund exam initiative, stating only that the agency would be announcing “something soon.”

The SEC announced Tuesday that it created an Office of Risk and Strategy within OCIE and appointed Driscoll to head the new office under the title of chief risk and strategy officer.

The SEC announced the same day that Robert Fisher will replace Driscoll as OCIE’s managing executive. In his new role, Driscoll will manage the new office as well as the investment advisor/investment company exam staff based in Washington.

Driscoll said at the IAA event that the agency continues to focus on “bad actors” and how they migrate to firms—“from the BD side to IA side. We track these folks and see where they end up.”

Now that OCIE has performed more than 700 never-been-examined advisor exams, Driscoll said, “we’re now moving into the never-before-examined ICs,” that registered before 2014, and have examined about 20 fund complexes.

He said that OCIE anticipates meeting its goal of examining 25% of ICs that have never been examined.

Renee Esfandiary, assistant director of the SEC’s National Exam Program, said in late February, that the never before examined advisor initiative may “officially end” this year for investment advisors.

“We’re just getting more and more advisors [registering] each year, so the percentage of advisors that have not been examined will continue to be an issue,” she said, adding that with the agency conducting more than 700 such exams, it more than met the goal of examining at least 25% of never-examined advisors.

– Related on ThinkAdvisor: SEC Launches Office of Risk and Strategy Within Exam Unit