Schapiro Says that SEC May Require Third Party Compliance Reviews
In a recent speech to the Council of Institutional Investors, SEC Chairman Mary Schapiro, said that one potential reform being considered by the SEC is to mandate that “certain investment advisers have third-party compliance audits to ensure their compliance with the law.” Ms. Schapiro explained that regulation of market professionals is one of the SEC’s four main jobs. In this regard, she also said that the SEC was considering requiring third party custody audits, reconciling RIA and BD regulation, and hedge fund registration.
OUR TAKE: We believe that a third party compliance review, not unlike an independent audit of financial statements, offers the independence and transparency necessary to ensure that a firm has implemented an adequate compliance program. Many institutional investors already require such an independent review.