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Communiques

The latest compliance news from SEC3 and CCO3.

Your CCO May Now Have An Incentive to Turn You In

April 22, 2015

The Securities and Exchange Commission today announced an award of more than a million dollars to a compliance officer who believed that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors.

Read more: Your CCO May Now Have An Incentive to Turn You In

 

SEC Charges Advisor with Failing to Disclose Conflict of Interest to Clients and Fund Boards

April 21, 2015

The SEC has charged an advisor with failing to disclose a conflict of interest to their clients and fund boards. In this significant case, the SEC alleges that the firm violated Rule 38a-1 and breached its fiduciary duty by failing to either eliminate the conflict of interest created by the outside business activity of a top-performing portfolio manager, or to disclose the conflict to the relevant fund board or advisory clients.

Read more: SEC Charges Advisor with Failing to Disclose Conflict of Interest to Clients and Fund Boards

 

SEC Warns of Using Confidentiality Language to Stifle Whistleblowers

April 06, 2015

On April 1, 2015, the Securities and Exchange Commission announced its first ever enforcement action against a company for violating Dodd Frank’s whistle blower rules. In this case, the company was found to have required employees to sign a form confidentiality statement when the company conducted internal investigation interviews.

Read more: SEC Warns of Using Confidentiality Language to Stifle Whistleblowers

 

SEC Reminds Advisers of the Need for Gifts and Entertainment Policies

March 25, 2015

In February 2015, the SEC’s Division of Investment Management issued guidance to the public with respect to the conflict of interest that arises when individuals and firms doing business, or hoping to do business, with a fund or investment adviser provide gifts, entertainment, favors or other forms of consideration to employees of the fund or adviser.

Read more: SEC Reminds Advisers of the Need for Gifts and Entertainment Policies

 

SEC to Conduct Second Phase of Cybersecurity Sweep

March 16, 2015

After completing a sweep of 100 firms focusing on preparedness concerning cybersecurity in 2014 and subsequently releasing their summary findings in February 2015, the SEC is poised to begin a second phase of their cybersecurity initiative this summer. This is in line with the 2015 exam priorities that included a continued focus on cybersecurity.

Read more: SEC to Conduct Second Phase of Cybersecurity Sweep

 

Permanent Bars as an Effective Deterrent

March 05, 2015

At the SEC Speaks 2015 Program on February 20, 2015, two SEC Commissioners gave their personal remarks on the Commission seeking permanent bars on wrongdoers to prevent further misconduct by such persons, and to deter future misconduct by others. SEC Commissioner Luis A. Aguilar set forth his views that one of his goals for 2015 is “for the Commission to bring more enforcement cases that have real impact—and that send the strongest message of deterrence.” Commissioner Aguilar stated that he had been a strong supporter of the Division of Enforcement, and had advocated “focusing on individual accountability, effective sanctions that deter and punish egregious misconduct, and policies designed to eradicate recidivism.”

Read more: Permanent Bars as an Effective Deterrent

 

Adviser Sanctioned for Inadequate Compliance Policies and Procedures

February 26, 2015

In January 2015, the SEC settled an action against a registered investment adviser who agreed to several findings of violations of the Investment Adviser Act of 1940 including:

  • failure to create and implement an adequate compliance manual
  • failure to conduct an annual review of the compliance policies and procedures
  • failure to conduct “best execution” reviews
  • failure to provide adequate compliance training to firm employees
  • failure to monitor employee personal trading
  • failure to amend their ADV
  • failure to deliver Form ADV to clients
  • failures by the CCO to review marketing materials
  • failure by the CCO to carry out few, if any compliance responsibilities, and having inadequate training and knowledge of the Advisers Act

The SEC also found that despite two examinations, one in 2004 and one in 2007, the firm did not adequately remedy the issues they were alerted to by the Staff. All of these violations were taken seriously by the Commission and resulted in a cease and desist order and a $50,000 civil money penalty.

While this action illustrates numerous compliance failures by the firm and its CCO, we think certain elements of the order are worth highlighting as they are often common situations, particularly with smaller or emerging managers.

Read more: Adviser Sanctioned for Inadequate Compliance Policies and Procedures

 

SEC Highlights Importance of Risk Assessments

February 21, 2015

The SEC stated in their 2015 Examination Priorities that, as was the case in prior years’ priorities, the Commission will conduct “focused, risk-based examinations”. This guidance confirms that investment advisers should be engaged in identifying risk areas and working to correct any deficiencies prior to the SEC conducting an examination. We have also recently seen a number of our client firms being requested by prospective investors to show them their risk assessments.

Read more: SEC Highlights Importance of Risk Assessments

 

SEC Issues Risk Alert with Cybersecurity Sweep Examinations Summary

February 04, 2015

On February 3, 2015, the SEC released their long-awaited Risk Alert reviewing the results of OCIE's cybersecurity sweep examinations in 2014 that followed their April 2014 Risk Alert on cybersecurity issues. OCIE's sweep examinations covered 57 registered broker-dealers and 49 registered investment advisers with respect to cybersecurity practices at those firms.

The Staff performed these examinations to better understand how broker-dealers and advisers address the legal, regulatory, and compliance issues associated with cybersecurity and to assess the examined firms' vulnerability to cyber-attacks.

Read more: SEC Issues Risk Alert with Cybersecurity Sweep Examinations Summary

 

SEC Announces Examination Priorities for 2015 - And New Year’s Resolutions for CCOs

January 14, 2015

As the SEC has been doing at the start of each year in recent years, the SEC announced its examination priorities for the new year. For 2015, the SEC’s priorities focus on three general areas: (i) protecting retail investors and investors saving for retirement; (ii) assessing market-wide risks; and (iii) using enhanced data analytics to identify illegal activity.

The SEC highlighted certain additional priorities, and of these we think the following are more noteworthy to our investment adviser and registered investment company clients:

Read more: SEC Announces Examination Priorities for 2015 - And New Year’s Resolutions for CCOs

 

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Newsletter

Get the latest compliance news and insights - delivered weekly. The SEC3 Communique covers all compliance topics. CCO3 focuses on CCO topics.
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Communiques

79 Advisers Self Report and $125 Million Returned to Investors

In line with the OCIE’s National Exam Priorities targeting its examination efforts to prevent harm to retail investors the SEC announced March 11, 2019, that it would be returning $125... read more »

CFTC Releases Exam Priorities

In a first time release, stemming from agency initiatives to improve its relationship with regulated entities, the Commodity Futures Trading Commission (CFTC) recently announced its 2019 Examination Priorities for registrants... read more »

FINRA’S Box of Chocolates

While we know you prefer a box of chocolates today instead of this industry update on compliance, this one is a gift and hence, will not add to your ever-growing... read more »

A Motivated Agency: The SEC Closing the Loop on the Edgar System Cyber Breach

You may recall after Clayton took the helm as Chairman at the SEC, the agency disclosed that it had its own cyber breach and the Edgar system was compromised. Today,... read more »

Examiners Take Reprieve with Gov’t Shut Down, But CCOs Must Carry On

These government shut downs don’t usually go on indefinitely. Before we blink an eye, examiners will be back on the beat. CCOs must stay vigilant. On December 20th the SEC’s Office... read more »

Pre-Dating & Back-Dating are Equally Risky

The SEC today suspended three accountants formerly of BDO USA LLP for improper professional conduct during its 2013 audit of AmTrust Financial Services Inc., an exchange-listed insurance company. According to the... read more »

Events

Chief Compliance Officer Roundtable: Breakfast Briefing - November 8, 2018

When: November 8, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Dorsey PF 2018 Symposium

When: September 26, 2018 (8:30 am - 6 pm Where: Dorsey & Whitney LLP | 51 W. 52nd Street | New York, NY 10019 Directions > SEC3’s President, Janaya Moscony will join...

Chief Compliance Officer Roundtable: Breakfast Briefing - June 14, 2018

When: June 14, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Webinar: 2018 SEC Exam Priorities & Recent Exam Highlights

Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. Tobin S. Cochran, Managing Member/President of Focus 1 Associates, LLC and...

Chief Compliance Officer Roundtable: Breakfast Briefing - February 7, 2018

When: February 7, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Upcoming Events - September & October 2017

Upcoming Events Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. SEC3 is teaming up with industry experts in NYC to discuss...

May 23, 2017 - Webcast: WannaCry Ransomware: Were You Really Protected or Just L…

When: Tuesday, May 23rd, 2017 | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. We...

June 14, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Willkie Farr & Gallagher LLP | 600 Travis Street | Suite 2310 | Houston, TX Barry Barbash from Willkie Farr & Gallagher LLP,...

June 13, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Haynes and Boone, LLP | 2323 Victory Avenue | Suite 700 | Dallas, TX 75219 Validated parking is available in the garage attached...

May 31, 2017 - Chicago

9:00-9:30 a.m - Networking and Continental Breakfast 9:30-11:00 a.m - Program Location: Baker & McKenzie LLP | 300 East Randolph Drive | Suite 5000 | Chicago, IL 60601 Kristin Gonzalez and Jerome Tomas...

May 17, 2017 (NYC WIMF)

This event is by invitation only. Please email info@seccc.com to learn more.

May 15, 2017 (NYC Chief Compliance Officer Roundtable)

9:00-9:30am - Networking and Continental Breakfast 9:30-11:00am - Program Location: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone:...

Webcast: The Most Insidious Cybersecurity Threat Is Also The Least Understood

When: Tuesday, April 25th | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. Ransomware, the...

CCO Liability (Part III): Managing Liability Webinar

In this webinar, panelists discuss indemnifications and insurance as potential remedies to address the direct financial risks to a CCO. Attendees will learn: What terms and conditions should Chief Compliance Officers be...

Webinar: CCO Liability (Part III): Managing Liability: Navigating Indemnities an…

When: Tuesday, February 21, 2017 Schedule: 11:00am ET / 10:00am CT / 9:00am MT / 8:00am PT / 7:00am AT Description of Webinar: The National Society of Compliance Professionals is pleased to host...