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SEC OCIE Exam Priorities For 2018

Mar 14, 2018 3:39:32 PM ,

Lou D'Agostino, Principal

If you’re a fund manager, you’ll want to be in the know on 2018 SEC Priorities for the National Exam Program (“NEP”), which continues to advance in terms of data usage to analyze regulatory filings and trading activity. 

 In FY 2017, the NEP completed over 2,870 examinations, an 18% increase over FY 2016.

For Registered Investment Advisers and Private Funds, there are a few areas which should be of concern. Below are excerpts from the 2018 SEC Exam Priorities which we think are of particular interest to the alternative asset management community.

Fee Disclosures and Conflicts of Interest

Proper disclosure and calculation of fees, expenses, and other charges investors pay will continue to be scrutinized. Examiners will also review fees charged to advisory accounts, particularly where the fee is dependent on the value of the account, to assess whether assets are valued in accordance with investor agreements, disclosures, and the firm’s policies and procedures.

In our opinion, allocation methodology of costs and expenses born by the management companies and the related funds could be reviewed.

Never Before Examined RIA's

If you have never gone through a SEC Examination, 2018 may be your year, as the SEC will be focusing on advisers which have never been through an examination. Now would be good time to conduct a mock regulatory exam in order to best prepare.

Mock Exams can: 

  • Help prepare for regulatory exams and the related process
  • Identify potential deficiencies which should be proactively addressed
  • Better position firms for compliance with regulators’ cybersecurity guidance

Electronic Advice

Additionally, Electronic Investment Advice will be highlighted within the exam. Investment advisers and broker-dealers, including “robo-advisers,” that offer investment advice through automated or digital platforms should take note.

Examinations will focus on registrants’ compliance programs, including the oversight of computer program algorithms that generate recommendations, marketing materials, investor data protection, and disclosure of conflicts of interest.

Quant funds beware! 

Cyber Security

Perhaps most notably, because “the scope and severity of risks that cyber threats present have increased dramatically,” cybersecurity will be prioritized at the forefront of examinations. Such “examinations have and will continue to focus on, among other things, governance and risk assessment, access rights and controls, data loss prevention, vendor management, training, and incident response.” 

You can read more about 2018 National Exam Program Examination Priorities here.

Tags: insurance, directors and officers coverage, hedge funds, Iron Cove Partners, OCIE, Office of Compliance Inspections and Examinations, Private Equity, Professional Liability, regulations, regulatory risk, SEC, SEC Investigations, Examinations, Securities and Exchange Commission

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Lou D'Agostino, Principal

Written by Lou D'Agostino, Principal

Lou D’Agostino is a dynamic senior insurance professional with nearly 17 years of experience in the financial services industry. He is presently serving as Principle of Iron Cove, a division of EPIC Brokers. In his current role, Mr. D’Agostino oversees a group of talented insurance professionals that offer a full suite of insurance products and consulting services to some of the nation’s wealthiest families/high net-worth clients and largest organizations. He is dedicated to business/new product development and large account placement, resulting in a proven track record of successful negotiation of even the most challenging of claims such as Madoff, investor litigation, and SEC/DOJ enforcement. As part of his work at Iron Cove, Mr. D’Agostino’s expertise has been called upon by a variety of industry trade groups. He has presented to the Financial Executives Alliance (FEA), the NYSSCPA, and other peer groups on a wide array of insurance related topics. He also presented at GAIMops, a leading financial services conference focusing on non-investment operations, on the topic of AIFMD and the associated insurance implications.

Iron Cove is a Division of EPIC Brokers and represents over 400+ Financial Institutions. With over 1500 Employees, 50 Offices in the US and over $500mm in annualized revenues, we currently rank as one the largest privately held insurance brokerages in the US. Iron Cove has been named Best US and Global Insurance Provider by Hedgeweek Two (2) years running.


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