If You Have Never Been Examined by the SEC, Get Ready

The Securities and Exchange Commission announced on Thursday, February 20th that its Office of Compliance Inspections and Examinations (OCIE) is launching an initiative directed at investment advisers that have never been examined, focusing on those that have been registered with the SEC for three or more years.

OCIE previously announced that examining these advisers is a priority in 2014.

As part of the initiative, OCIE will conduct examinations of a significant percentage of advisers that have not been examined since they registered with the SEC. These examinations will concentrate on the following:

  • compliance programs;
  • filings and disclosure (in particular, disclosure of conflicts of interest)
  • marketing (in particular, misrepresentations and omissions of material facts in marketing materials)
  • portfolio management (including allocation of investment opportunities); and
  • safekeeping of client assets.

Excluded from this initiative, are advisers to private funds, which are being examined pursuant to the “Presence Exam” initiative launched in October 2012.

Regarding the status of Presence Exams, the SEC has provided in recent conferences certain interesting statistics: 250 Presence Exams have been completed and 30 are still open, putting the SEC ahead of schedule in hitting its target of examining 25% of newly-registered private fund advisers within 2 years.

Additional details on the examinations of never-examined are available here.