On April 14, 2020, the staff of the SEC’s Division of Investment Management (the “Division”) published a Statement on the Importance of Delivering Timely and Material Information to Investment Company Investors (the “Statement”). The Statement gives notice that the Division has a keen eye on prospectus risk disclosure as it continues to monitor the ongoing impacts of the COVID‑19 pandemic on investment companies. “In light of the current uncertainties and market disruptions,” the Division explains, “investors need high-quality financial information more than ever.”

The Statement comes amid other guidance and temporary regulatory relief from the SEC, including public statements by Chairman Jay Clayton and Chief Accountant Sagar Teotia emphasizing the need to assist “Main Street investors” in navigating turbulent markets. Uniquely, the Statement focuses explicitly on how fund complexes might modify existing disclosures.
Continue Reading SEC Staff Speaks to COVID-19 and Fund Prospectus Disclosure

On April 7, 2020, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) published two risk alerts intended to provide market participants with advance information regarding (1) upcoming inspections for broker-dealer compliance with Regulation Best Interest (“Regulation BI”) and (2) upcoming inspections for broker-dealer and investment adviser compliance with Form CRS. The compliance date for both Regulation BI and Form CRS is June 30, 2020.

You can find more details in our client alert.
Continue Reading SEC Staff Publishes Risk Alerts Regarding Reg BI and Form CRS Inspections and Possible COVID-19 Impact

My first post discussed the SEC’s Office of Compliance Inspections and Examination’s (“OCIE’s”) recent Risk Alert (the “Alert”) and specific fund categories in its crosshairs. This post will cover the three remaining fund categories and general examination issues identified by OCIE in the Alert.

Continue Reading OCIE Announces Risk-Based Exam Initiatives for Mutual Funds—Part 2

Recently, the Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert (the “Alert”) identifying six categories of mutual funds and mutual fund advisers it plans to examine: (i) index funds tracking custom-built indexes; (ii) smaller and thinly-traded exchange traded funds (“ETFs”); (iii) funds with aberrational underperformance relative to their peers; (iv) funds with higher allocations to securitized assets; (v) advisers “new” to managing mutual funds; and (vi) advisers who also manage private funds with similar strategies or that share managers with the mutual funds. The Alert provides a list of practices, risk and conflicts for each specific type of fund, but also notes OCIE will also look at standard fund examination topics.

This post reviews the first three specific categories of funds identified in the Alert. A subsequent post will discuss the final three categories, general examination issues mentioned in the Alert and additional considerations for any exam.


Continue Reading OCIE Announces Risk-Based Exam Initiatives for Mutual Funds—Part 1

This post continues our discussion of the 2018 examination priorities and guiding principles published by the SEC’s Office of Compliance Inspections and Examination (“OCIE”) on February 7.
Continue Reading Ask and Ye Shall Receive: OCIE’s 2018 Examination Priorities – Part 2 of 2

Industry professionals have noted that the SEC’s Office of Compliance Inspections and Examination (“OCIE”) was tardy in releasing their priorities list, although recent speeches from SEC officials have provided a preview of the issues in OCIE’s crosshairs. The full priority list was released on February 7.

The SEC’s examination priorities identify practices, products and services that reflect potentially heightened risks to investors and capital markets. As in prior years, the SEC’s priorities are thematic, covering:  retail investors, including seniors and retirement savers; compliance and critical market infrastructure; FINRA and MSRB activities; cybersecurity; and anti-money laundering. The first of these priority areas is summarized below.
Continue Reading Ask and Ye Shall Receive: OCIE’s 2018 Examination Priorities – Part 1 of 2

Speaking at a compliance workshop sponsored by the Investment Adviser Association held in Atlanta on November 10, 2016, Bill Royer, Associate Director of the SEC examination program in the Atlanta Regional Office of the SEC laid out the priorities that he expected the SEC’s Office of Compliance Inspections and Examination (OCIE) to focus on in the coming year.
Continue Reading SEC Staff and Chair Talk Examination Priorities (For the Time Being At Least)