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November 19, 2020 at 05:43 PM
The Securities and Exchange Commission’s exam division flagged Thursday numerous deficiencies in advisors’ compliance programs — namely lack of resources, as well as failing to give the chief compliance officer sufficient authority.
Related: SEC Continued With ‘Vigor’ Despite Pandemic: Clayton
In a Thursday Risk Alert, the agency cites six main categories where advisors are falling short in complying with Rule 206(4)-7, the Compliance Rule, under the Investment Advisers Act of 1940:
- Inadequate compliance resources;
- Insufficient authority of CCOs;
- Annual review deficiencies;
- Implementing actions required by written policies and procedures;
- Maintaining accurate and complete information in policies and procedures; and
- Maintaining or establishing reasonably designed written policies and procedures.
Staff in the agency’s Office of Compliance, Inspections and Examinations observed advisors that did not devote adequate resources, such as information technology, staff and training, to their compliance programs.
For example: CCOs who had numerous other professional responsibilities, either elsewhere with the advisor or with outside firms, and who did not appear to devote sufficient time to fulfilling their responsibilities as CCO, the alert states.
Related: SEC Alert Flags ‘Multi-Branch’ Risks
“While CCOs may have multiple responsibilities, OCIE observed instances where such CCOs did not appear to have time to develop their knowledge of the Advisers Act or fulfill their responsibilities as CCO,” the alert states.
