The Office of Compliance Inspections and Examinations ("OCIE") identified compliance issues for investment advisers related to Rule 206(4)-7 (the "Compliance Rule") under the Investment Advisers Act.
In a Risk Alert, OCIE outlined the following common compliance deficiencies:
- Inadequate Compliance Resources: Advisers did not devote sufficient resources to their compliance programs. OCIE observed (i) Chief Compliance Officers ("CCOs") not devoting sufficient time to fulfilling their responsibilities, (ii) a lack of adequate training for compliance staff, and (iii) advisers that had grown in size but had not hired additional compliance staff;
- Insufficient Transparency: Advisers restricted the authority of their CCOs by withholding critical compliance information and/or limiting the CCOs' interactions with senior management regarding potential compliance issues;
- Annual Review Deficiencies: Advisers were unable to produce evidence of annual reviews that they claimed to conduct and failed to identify key risk areas in their annual reviews;
- Failure to Implement Written Policies: Advisers did not implement compliance programs required by written policies or procedures;
- Maintaining Accurate and Complete Information in Policies and Procedures: Compliance policies, including off-the-shelf policies, contained outdated or inaccurate information about the adviser; and
- Poorly Designed Written Policies: Advisers failed to establish or implement appropriate policies and procedures relating to portfolio management, marketing, trading practices, disclosures, advisory fees and valuations, and safeguards for client privacy.
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