Too Commonly Recurring Violations

August 13, 2018
Practical Compliance & Risk Management for the Securities Industry

Every year the Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) issues a list of “examination priorities” – areas of focus for the year to come. These, and other hot topics like custody, must be addressed by firms’ compliance departments in setting priorities for testing and consideration during the required annual compliance program review under Rule 206(4)-7 (the “Compliance Rule”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and throughout the year. And, of course, advisers will always want to be prepared to answer questions on examination about those priority areas should OCIE come to visit. While there are countless articles relating to each year’s examination priorities, the purpose of this article is not to focus on those areas; rather, we are going to focus on those regulatory infractions that continue to lurk in the investment advisory industry.

Empirical evidence is often lost in the publicity of the priorities list and in risk alerts and speeches from the OCIE staff, which suggest that certain old standby areas continue to receive significant attention on examination and from the SEC’s Division of Enforcement. With this in mind, this article explores five common deficiency areas that may not make the “hot topics” lists but that merit consideration by advisers: cherry picking, insider trading, performance advertising, advisory fees, and compliance program failures.

Read "Too Commonly Recurring Violations."