SEC OCIE RELEASES CORE INITIAL INFORMATION REQUEST LIST FOR ADVISER EXAMS
The SEC Office of Compliance, Inspections and Examinations (OCIE) has released its core initial request for information for investment adviser examinations. As a general overview, OCIE said that it will request general information about the adviser’s business and clients including a trade blotter, significant information about the firm’s compliance program, and testing results and actions. As part of the review of the compliance program, OCIE will request to review the firm’s compliance policies and procedures, its inventory of compliance risks (aka risk assessment), testing results, and complaint files. Additionally, OCIE will examine a wide range of substantive areas including trading and brokerage practices, portfolio management compliance, Code of Ethics, and performance advertising and marketing. OCIE noted that the core information request would expand to the extent that an adviser engages in additional activities such as sponsoring mutual funds or hedge funds, participating in wrap or manager-of-managers program, and engaging in broker-dealer activities.
OUR TAKE: This document gives the best guidance to date on the SEC’s view of an effective compliance program. It also helps compliance officers design their record retention systems so that they’re ready for the initial information request whenever it comes. Compliance officers should also note that the OCIE specifically highlights the importance of conducting (and recording in writing) a risk assessment/inventory and conducting testing.