SEC Commissioner Rips Small Firm Compliance
In a recent speech to NASAA, the association of state securities regulators, SEC Commissioner (and former SEC Chairman) Elisse Walter questioned the compliance efforts at smaller advisory firms: “We recognize that small firms present special challenges. For example, many of them don’t have comprehensive compliance programs in place. Many more have off-the-shelf programs that aren’t tailored to their actual businesses.” She said that CCOs that have multiple job responsibilities “have too many priorities on their plates to devote adequate time to compliance efforts.” Additionally, they have “conflicting responsibilities — concerns about cost, privacy, investment strategies and so on.” She said that securities regulators need more resources to examine more advisers.
OUR TAKE: We do question whether smaller firms really pose this enhanced risk that Ms. Walter claims without any empirical support. Regardless, smaller firms should know the inherent bias of securities regulators when they show up for an examination.