The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) published a description of the types of information its examiners will request prior to conducting routine on-site examinations of registered investment advisers. The publication appears to be part of the SEC’s efforts to bring more consistency and standardization to the examination process.
OCIE’s initial information request can be organized into five broad categories:
- general information to assist in understanding the firm’s business and investment activities (e.g., organizational charts, demographic data regarding advisory clients, trade blotter);
- information regarding compliance risks identified by the firm and the written policies and procedures implemented to address such risks (e.g., valuation, portfolio management, brokerage arrangements, conflicts of interest);
- documents relating to the results of and output from compliance testing performed (e.g., compliance review results, transactional testing);
- information regarding testing results and the follow-up actions taken by the firm to address weaknesses or breaches in firm policies and procedures (e.g., disciplinary actions, changes in policies/procedures, client correspondence); and
- information to perform testing of the compliance system (e.g., trade profitability, access person reports, material non-public information control and monitoring procedures).
OCIE’s initial core request for information is provided for examinations of advisers that provide “traditional money management services to non-fund clients.” Advisers that engage in other activities such as sponsoring registered investment companies or private funds, participating in PIPES offerings or wrap-fee programs, being registered as a broker-dealer, and operating as a manager of managers should expect information requests that include the core set of information discussed above, as well as additional information that will permit OCIE to evaluate compliance related to such additional activities.