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 examinations 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 highly relevant to SEC registered investment advisory firms. Last week we discussed segment 2 which focused on ideal ways that the Chief Compliance Officer (CCO) of an RIA firm can handle an SEC regulatory exam. Below is a recap of the third segment.
This segment focuses on the role of an outside investment adviser compliance consultant mandated by the SEC during an enforcement settlement. This practice is not uncommon and Mr. Bowden notes that this mandate is not meant to call out the compliance program, but the firm as a whole. “Compliance of a firm is not the sole responsibility of the CCO. It’s an organizational responsibility,” says Bowden. He goes on to say that part of the third party compliance consultant’s role is to address issues beyond the CCO.
Mr. Bowden notes that the SEC recognizes that the vast majority of compliance officers and other advisory firm principals are not bad actors by noting that “we start with the premise that the majority of the people in the industry are trying to do the right thing.” As such, Mr. Bowden highlights that the SEC makes it a priority to help compliance officers better perform their jobs through a coordinated outreach effort which includes publishing the SEC examination priorities, and risk alerts. Mr. Bowden encourages everyone to take advantage of these resources so they are prepared and understand the issues that the SEC will be focused on.
Mr. Bowden also stresses that the SEC is making a genuine effort to be as transparent as possible “so it is not a game of got you.” Furthermore, he goes on to state that “what we’re trying to do is influence people. We want to influence people to behave in ways that work best for investors and our markets.” As RIA compliance consultants, we encourage the CCO of all RIA firms to review the SEC OCIE website as the agency has done a nice job of publishing all past examination priority memos and risk alerts.
The full video of part 3 IA Watch’s interview can be found on Youtube. Be sure check back soon for additional recaps on interview parts 4 and 5.