The Securities and Exchange Commission’s exams of investment advisors and investment companies will “take a hit” this year due to the government shutdown and will “undoubtedly” not reach the record 17% exam level of 2018, Dan Kahl, deputy director of the SEC’s Office of Compliance Inspections and Examinations, said Thursday.
Kahl, speaking at the IAWatch compliance event in Washington, also told advisors that OCIE will be “working on lots of risk alerts this year,” with a goal to “get as many out as we can.”
A near term alert will focus on Regulation SP and compliance policies, he said. “We’ve done a lot of exam work on Reg SP” and policies and procedures required by the reg, which is related to data security, and “found lots of deficiencies.”
Said Kahl: “I’m using the pulpit now to suggest that you take a look at your Reg SP” policies and procedures that address such things as confidentiality of client information.
As to digital assets, which Kahl said “may be touching” some RIA firms, OCIE started a few initiatives last year that will continue this year, and plans a “more in-depth approach this year to get a sense of what’s happening in your shops.”
He noted the digital assets initiative launched by the agency last year to “get a lay of the land” in the advisor space. “We didn’t find much. We found some dalliance” in digital assets by private funds. However, “there’s lots of interest from clients.”
This year, Kahl continued, “we’re going to continue to essentially survey to keep our pulse on digital assets” and advisor accounts.
As to senior investors, OCIE will continue to focus on fees and expenses, Kahl said. “We are very frequently finding problems, not necessarily a fraudulent area, but it’s lack of controls, lack of attention to your billing practices.”
Other areas of focus regarding senior and retail investors include rollovers, recommendations, fund selection, share classes and breakpoints, he said.
— Check out Let Reg BI ‘Play Out’: SEC’s Peirce on ThinkAdvisor.