The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations raised numerous concerns regarding outsourced compliance activities by investment advisers and funds – in particular the Chief Compliance Officer function — following a review of such practices. In general, OCIE found “generally effective” outsourcing where there was “regular, often in-person communications between the CCOs and the registrants; strong relationships established between the CCOs and the registrants; sufficient registrant support of the CCOs; sufficient CCO access to registrants’ documents and information; and CCO knowledge about the regulatory requirements and registrants’ business.” OCIE implied there was less effective outsourcing where third-party CCOs infrequently interacted personally with registrants and relied on impersonal means of communication (e.g., electronic communications and pre-defined checklists); were not able to access documents independently but relied on registrants to select documents for their review; and serviced multiple registrants when they did not have adequate resources. OCIE also found that there was a “general lack of documentation” supporting testing by outsourced CCOs of registrants’ mandatory annual reviews, including testing for compliance with firm policy and procedures. As part of its review of outsourcing of compliance activities, OCIE reminded investment advisers “[a] CCO, either as a direct employee of a registrant or as a contractor, must be empowered with sufficient knowledge and authority to be effective.”