On December 2, Lori Richards, Director of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations, published an open letter to the CEOs of SEC-registered firms, including investment advisers, investment companies, broker-dealers and transfer agents. The SEC staff reminded firms that while reductions and cost-cutting measures are common in periods of economic downturn, SEC-registered firms have a legal obligation to maintain an adequate compliance program reasonably designed to achieve compliance with the firm’s obligations under the securities laws. As SEC Chairman Cox noted recently, “[n]ow more than ever, companies need to take a long-term view on compliance and realize that their fiduciary responsibility requires a constant commitment to investors. That means sustaining their support for compliance during this market turmoil, and beyond it as well.”
SEC examiners may focus on any decrease in compliance resources. Consequently, firms should be prepared to justify decreases in compliance resources and assure themselves that compliance objectives can still be met with reduced resources.