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Regulation and Compliance > State Regulation

SEC Launches Multi-Branch Exam Initiative

By Melanie Waddell

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The Securities and Exchange Commission has a launched a multi-branch advisor initiative targeting the “unique risks and challenges” for advisors operating through branch offices geographically separate from their principal place of business.

Challenges in the branch office model specifically include designing and implementing compliance programs, as well as supervising people and processes in branch offices, the SEC’s Office of Compliance Inspections and Examinations states in its Dec. 12 Risk Alert.  

OCIE’s “Multi-Branch Adviser Initiative” will focus on compliance supervision, the role and empowerment of compliance personnel, and how policies and procedures are implemented. OCIE staff will also review investment recommendation oversight, conflicts of interest, and allocation of investment opportunities. The process multi-branch firms use regarding oversight and supervision of branch office activities will also be reviewed.

Cipperman Compliance Services said that the SEC “is catching up” with the Financial Industry Regulatory Authority in launching such exams, as FINRA “has longstanding prescribed oversight obligations for OSJs and branches. For compliance officers, oversight of far-flung operations creates additional information and supervision challenges that often exceed current resources.”

As to assessing advisors’ compliance programs, OCIE states that through interviews and the review of advisory records, the examiners will assess, among other things:

  • Implementation of policies and procedures in the main and branch offices;
  • Supervision structure, including an assessment of how such supervision is tailored to the unique risks in particular branches;
  • Role and empowerment of compliance personnel charged with overseeing branch offices, including their level of access to documents and relevant information; and
  • Accuracy of information on the advisor’s filings regarding branch offices, including Form ADV, as compared to actual practices.

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