OCIE Observations - Commonly Cited Compliance Issues

Avoid These Common Compliance Deficiencies and Weaknesses

The Office of Compliance Inspections and Examinations (OCIE) identified the most common compliance deficiencies under the Compliance Rule (Rule 206(4)-7 under the Investment Advisers Act of 1940) in an OCIE Risk Alert. The following is a summary of the six most cited compliance rule deficiencies and weaknesses.  

Inadequate Compliance Resources: Advisers did not have to devote adequate resources to compliance staff, which affected the implementation of compliance policies and procedures, and compliance with fundamental regulatory requirements such as performing an annual review.

Insufficient Authority of CCOs: Advisers did not have sufficient authority at the firm to develop and enforce the adviser’s compliance policies and procedures.

Annual Review Deficiencies: Advisers did not have evidence or were unable to demonstrate the required annual review of their policies and procedures to determine their adequacy as well as the effectiveness of their implementation.

Implementing Actions Required by Written Policies and Procedures: Advisers failed to properly train personnel, follow compliance checklists, review marketing materials, review client accounts to assess consistency with investment objectives and designated timeframes, and other actions required by their written policies and procedures.  

Maintaining Accurate and Complete Information in Policies and Procedures: Advisers had outdated, incomplete, or irrelevant policies and procedures.

Maintaining or Establishing Reasonably Designed Written Policies and Procedures: Advisers utilized written policies and procedures not tailored to reasonably prevent violations of the Advisers Act or relied on policies and procedures of an affiliated entity related to affiliates or other related professions.

In response to the above, many of the advisers modified their written policies and procedures to ensure that they were tailored to their business, as well as ensure that they would be adequately reviewed and implemented.  

For more information: Please refer to the full OCIE Risk Alert

How Coast to Coast Compliance Can Help

If you have any questions regarding these commonly cited compliance issues or want to discuss how Coast to Coast Compliance can serve as an on-demand compliance resource for your firm and its compliance staff, please contact us.