The SEC Office of Compliance Inspections and Examinations ("OCIE") identified common deficiencies in investment advisers' compliance with "best execution" obligations. The findings were drawn from recent OCIE examinations.
As identified in a Risk Alert, the OCIE revealed that investment advisers commonly fail to:
- conduct best execution reviews of broker-dealers' execution performance;
- consider relevant factors, such as the "full range and quality of a broker-dealer's services in directing brokerage," during best execution reviews;
- consider the costs and quality of services available from a variety of broker-dealers before determining which one to utilize;
- adequately disclose their execution practices;
- disclose soft dollar arrangements in Form ADV;
- properly administer mixed-use allocations of soft dollars; and
- implement or follow acceptable compliance policies and procedures.
The OCIE urged investment advisers to evaluate their existing policies and procedures related to best execution and remedy any deficiencies.
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