In a speech given in late April, Peter Driscoll, Director of the Office of Compliance Inspections and Examinations (OCIE), discussed the importance of cooperation among compliance officers, senior management, and the OCIE to promote compliance and more effectively protect retail investors.
OCIE's Role in Protecting Retail Investors
Driscoll summarized that OCIE's purpose is to examine its registrant firms' risk areas that often could pose potential harm to retail investors if not appropriately mitigated.
Specifically, he chose to highlight five major areas of OCIE's examination priorities:
1. The critical nature of proper disclosure, including fees and expenses, to help investors make informed investment decisions.
2. The need for adherence to the Custody Rule, which protects client assets from misappropriation or theft of funds.
3. The importance of upholding a firm's fiduciary duty (a firm's obligation to put a client's interests above its own), which requires full and proper disclosure of all material conflicts of interest, in accordance with Section 206 of the Advisers Act.
4. The significance of recognizing inherent risks involved in firms borrowing from clients in the name of "growing business," often without proper disclosure of the firm's unstable financial health.
5. The need to protect senior investors through raising awareness of their unique needs, as well as education surrounding laws and regulations designed to address senior financial abuse and exploitation, in addition to outreach programs to better inform senior investors themselves.
The Need for Adequate Compliance Resources and Empowerment of the CCO
Driscoll expressed serious concern about information the OCIE frequently receives that indicates compliance resources and budgets are being cut, limiting the effectiveness of firms' compliance programs and compliance officers in keeping up with risk profiles, which would potentially leave investors vulnerable to financial harm.
"We cannot underscore enough a firm's continued need to assess whether its compliance program has adequate resources to support its compliance function. For without adequate resources, compliance professionals are like swimmers swimming against the tide, constantly working to keep up and not lose ground."
Driscoll also lamented the undue burden placed on chief compliance officers (CCOs) for the success or failure of a compliance program as a whole, when compliance should be made a firm-wide obligation, with senior management and ownership setting the expectations for proper compliance and the protection of a firm's clients.
Driscoll also remarked:
"An empowered CCO should have full authority to develop and enforce policies and procedures and be of sufficient seniority and authority within the firm to compel others-including others in senior management-to follow and enforce those policies and procedures."
In an effort to support CCOs in their efforts, the OCIE prioritizes transparency and communication regarding commonly observed deficiencies through its risk alerts, hoping to assist CCOs in holding firms accountable and creating a culture of compliance.
Creating a Culture of Compliance at Your Firm
The OCIE is making efforts to educate and support firms in protecting retail investor interests, as well as enforcing its expectations through its examination process.
To create a culture of compliance that aids firms in meeting its customers' investment needs by having strong internal controls to support those efforts, JLG recommends that firms place strong emphasis on the following:
● Allocate adequate resources to carry out compliance measures;
● Develop and uphold robust compliance policies and procedures;
● Establish the authority of the CCO within an organization to uphold those compliance policies;
● Keep up with the various risk alerts and other tools made available by the OCIE to assist with the development of your firm's compliance culture; and
● Consider having a mock SEC examination to test whether your internal controls, particularly in the above-referenced high risk areas, meet regulatory expectations.
Should your firm need assistance with conducting a mock SEC exam, training on senior investor issues or enhancing a compliance programs to help further protect retail investors and their financial interests, the attorneys at Jacko Law Group, PC., are here to help. We are available and ready to apply our years of experience to your unique situation, contact us here.
- Managing Partner and CEO
Michelle L. Jacko, Esq. is the Managing Partner and CEO of Jacko Law Group, PC, which offers corporate and securities legal services to broker-dealers, investment advisers, investment companies, hedge/private funds and ...
Add a comment
- Inside the SEC’s Proposed New Rules for Financial Advisor Advertising
- A Costly Failure to Follow Written Policies and Procedures
- California Governor Signs CCPA Amendments, Privacy Related Bills into Law
- SEC Proposes Exemptions to Application Procedures
- SEC Requests Proposals to Innovate Markets for Thinly Traded Securities
- PricewaterhouseCoopers LLP pays $7.9 to Settle SEC Improper Professional Conduct, Auditor Independence Charges
- HCR Advisors Settles SEC Charges on Failure to Supervise and Implement Compliance-Related Policies and Procedures
- Amadeus Wealth Advisors, Three Bridge Wealth Advisors Settle SEC Unlawful Proxy Charges
- Charging Fees for Inactive Accounts can be as Problematic as Churning
- SEC: Prudential Failed to Disclose Conflicts of Interest to Fund Boards
- Securities and Exchange Commission (SEC)
- Advisers Act
- Investment Advisers
- Policies and Procedures
- Securities Law
- Office of Compliance Inspections and Examinations (OCIE)
- California Consumer Privacy Act (CCPA)
- Ponzi Scheme
- Aging Clients
- Form U5
- Due Diligence
- Virtual Currency
- Dodd-Frank Act
- Regulation Best Interest
- Private Equity
- Private Funds
- Transition Services
- Hedge Funds
- Regulatory Examinations
- Personally Identifiable Information (PII)
- Government Shutdown
- Risk Alert
- Social Media Marketing
- Exchange-Traded Funds (ETFs)
- Investment Company Act
- Rule 6c
- Broker Protocol
- Wells Fargo