2019 SEC OCIE Examination Priorities

On December 20th, 2018, the SEC's Office of Compliance Inspections and Examinations (OCIE) announced its examination priorities. Particular emphasis will be on adviser fees and expenses as well as digital assets and cybersecurity. 

With over 1,000 employees in 11 regional offices, OCIE completed over 3,150 examinations in 2018 representing a 10% increase from 2017. 

Examinations led to more than 160 Enforcement Referrals and resulted in firms returning more than $35 Million to investors. 

Total Assets of RIA's increased to $84 Trillion. 

Adviser Expense Misallocations. OCIE staff has observed advisers to private and registered funds that misallocated expenses to the funds. For example, staff observed advisers that allocated distribution and marketing expenses, regulatory filing fees, and travel expenses to clients instead of the adviser, in contravention of the applicable advisory agreements, operating agreements, or other disclosures.  Such scrutiny has been also been given to insurance premium allocation methodology. Our advice is develop and document such methodology and adhere to it.

Further, OCIE will continue to prioritize Cyber Security and will focus on network configuration, access rights and controls, data loss prevention, vendor management and incident response. We continue to work with our clients in  understanding the nuances of Cyber Insurance protection and the importance of implementing an adequate incident response plan to help address and mitigate a Cyber incident.

For a link to the 2019 SEC OCIE Priorities click here or the thumbnail above.

Stay tuned for upcoming webinars on Cyber Security and Incident response from our Alternative Asset Management Team.