*Last Updated January 2, 2019
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 investment adviser regulatory examinations. The full interview is split into five segments. In each segment, Mr. Bowden reveals a number of compliance and regulatory insights that are highly relevant to SEC registered investment adviser (RIA) firms. The first segment was primarily focused on the topic of risk assessments that the SEC conducts internally to help identify potential high-risk RIA firms that should be prioritized for examination. Below is a recap of the second segment.
This segment focuses on the most ideal (and not so ideal) ways that the Chief Compliance Officer (CCO) of an RIA firm can handle an SEC regulatory exam. On this topic, Mr. Bowden notes,that the best thing a CCO can do is “be organized, be responsive, and be helpful to the examination staff.” He states that it is important to keep in mind that each time an examiner begins a new exam, they are starting a new job. Because every advisory firm is different, examiners will need to learn about the particular firm they are auditing. To this, he goes on to state that “it’s most helpful when firms are willing to educate the examiners at the outset about the nature of the business and what they are trying to accomplish from a business standpoint.” In regards to the most effective exams, Mr. Bowden reiterates that it is vital that the CCO produce documents and respond to requests in a timely and organized manner.
In regards to the interview portion of the audit, Mr. Bowden states that it is optimal to produce individuals at the firm that are best qualified to answer questions. He stresses that the main point of contact in the firm should not try to address all issues due to the fact that he/she may not be particularly familiar with all of them. He gives the example that the examiners may be interested in trading operations, but the CCO may be less qualified to address detailed questions than another principal at the firm such as the head trader. If the firm is unwilling to provide others to answer particular questions, Mr. Bowden stresses that it can lead to delays and unfortunate misunderstandings.
The main takeaway from part 2 of the interview is to be efficient, organized, and prepared.
The full video of part 2 IA Watch’s interview can be found on Youtube. Be sure check back soon for additional recaps on interview parts 3 through 5.