12.28.2009 John H. Walsh, the Acting Director of the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE), spoke at the 2009 National Society of Compliance Professionals (NSCP) National Meeting on compliance issues. After reviewing 2009 and touching on how OCIE has reacted to the events of 2009, he discussed five specific areas where the examination program is changing:
- OCIE will gain more expertise. This is one of the most important lessons we have learned. Sweep examinations will play an important role. In a sweep review, OCIE builds a special team, reaches out around the agency for the expertise it needs, prepares a customized plan, circulates the plan through the other offices and divisions within the SEC, consults with the SEC itself, performs a series of examinations with the same team (thus providing the team with a defined learning process), and then reports back inside the agency. OCIE also created a new type of examiner position called a Senior Specialized Examiner, which is an individual with significant expertise in trading options, running an equity-trading desk, or rating the credit-worthiness of asset-backed securities, and so on. OCIE is also enhancing its training, with targeted internal programs, collaboration with other regulators, and more extensive use of external certification programs.
- OCIE will be better organized to make sure the right expertise is deployed to each problem. OCIE now has an Assistant Director from a regional office assigned to work full-time to seek answers to the following questions: (1) how does OCIE examine firms that are registered as both a broker-dealer and an investment adviser; (2) how does OCIE examine firms that have affiliates with another registration status; and (3) how does OCIE examine firms that have only a single registration status, but are engaging in activities that require the deployment of expertise that is not possessed by the examination team? OCIE also is establishing periodic review procedures for all examinations, in which a primary agenda item will be whether the examination team needs help with additional expertise. OCIE has conducted several cross-training programs, in which examiners and examination managers are learning about one another’s areas of expertise. OCIE is building ad hoc teams to address specific compliance issues that touch multiple areas of expertise. For example, we have formed a cross-disciplinary working group to review firms that use algorithms in their trading.
- OCIE will reach out to third parties to verify what OCIE has been told. In 2009, OCIE established an aggressive program of third-party verification. OCIE is reaching out to advisers’ counterparties, custodians and clients.
- OCIE examiners will not be intimidated. OCIE has established an internal Exam Hotline for examiners who believe they are being intimidated.
- OCIE will regularly review its policies and procedures to make sure it is keeping them current and up-to-date.
Click http://www.sec.gov/news/speech/2009/spch100509jhw.htm to access the speech.