Earlier this year, IA Watch conducted an extensive video interview with Drew Bowden who is the director of the SEC Office of Compliance Inspections and Examinations (OCIE). The OCIE is the division within the SEC that conducts audits of registered investment adviser (RIA) firms. The full interview is split into five segments. In each segment, Mr. Bowden reveals a number of compliance and regulatory insights that are of great interest to SEC-registered investment advisory firms. Last week we discussed segment 4 which focused on the types of coaching that are appropriate for the Chief Compliance Officer (CCO) to give their staff when the firm is going to be examined by the SEC. Below is a recap of the fifth segment.
The final segment focuses on that status of the SEC’s OCIE exam manual. The topic was first brought to the table by the SEC in 2011, in which they stated a manual would be created and released to the public, but that has not yet happened. IA watch asked Mr. Bowden where that initiative stands, to which he responds, “We have our exam manual 1.0. We’ve done a complete revision that we’ll probably be ready to come out with internally, soon. And that’s one again, where we’re evaluating what are the pros and cons of sharing that with the public and how does it help the investor and how does it help the mission.”
A final determination has not been made by the SEC, but Bowden states that both sides of this issue have reasonable arguments. For those who argue the manual should be published, Mr. Bowden says “I think their rationale is ‘what’s sauce for the goose is sauce for the gander’ and we ought to be transparent about the process, which I’m completely sympathetic to.” On the opposing side of the argument, Bowden says those people feel that “by making it public you just give ammunition to people who want to delay and hinder the examination process.”
Since no official release date has been given, as RIA compliance consultants, we encourage the CCO of all RIA firms to review the SEC OCIE website as well as our “10 Steps to Prepare for a Regulatory Exam” checklist to ensure that your advisory firm is fully prepared for an exam.
The full video of part 5 IA Watch’s interview can be found on Youtube.