Compliance Concerns of SEC Regional Office Seen as Preview of Larger Exam Priority

A client alert by law firm Locke Lord reports on a January 11, 2018 conference call held by the SEC’s Fort Worth, Texas, Regional Office. The call, which drew 2,000 participants, aimed to increase transparency by discussing the 2017 regional examination findings and previewing some likely priorities for 2018. According to the alert, the conference call focused on deficiencies that have cropped up in exams in the region in 2017, including deficiencies related to advisers’ compliance policies and procedures. The Fort Worth Regional Office reported that compliance-related citations were included in almost 50 percent of the region’s deficiency letters in 2017. The regional office “found compliance programs containing policies that were inapplicable to the firm’s business operations and, in some instances, included the name of another firm instead of their own. As a result, many firms were already in violation of their own policies,” according to the law firm’s alert. The regional office reminded conference call participants that the Compliance Rule requires annual review to address any compliance issues from the previous year, as well as any changes in applicable laws. The regional office also warned that it was “no fan” of CCOs that wear other hats in the firm or report to the general counsel instead of the firm’s CEO.