top 10 focuses of sec scrutiny - are you prepared for an sec exam?
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Copyright © 2013 Advent Software, Inc. All rights reserved.
preparedfor an
Are you
SEC exam?
This communication is provided by Advent Software, Inc. (“Advent”) for informational purposes only and should not be construed as or relied on in lieu of, and does not constitute legal advice on any matter whatsoever discussed herein. Advent shall have no liability in connection with this communication or any reliance thereon.
Copyright © 2013 Advent Software, Inc. All rights reserved.
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There
won’t be enough time
on the way.
to start preparing for an SEC exam
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once one is
prepareThe time to
now.for
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that exam is
Where should you start?
Top 10Here are the
focuses ofSEC scrutiny.
Copyright © 2013 Advent Software, Inc. All rights reserved.Focus Areas in SEC Examinations of Investment Advisors: The Top 10. Speech by Lori A. Richards, Director, Office of Compliance Inspections and Examinations, U.S. Securities and Exchange Commission, March 20, 2008
Controls over
Because many firms base client fees on the value of holdings,the SEC wants to make sure holdings are not overvalued.
1 valuation.
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2
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Controls over
The SEC is highly sensitive to insider trading. Does your firm have a proprietary code of ethics, policies and procedures, and enforcement mechanisms to prevent the misuse of “material non-public information?
non-publicpersonal
information
trading.and
Dealing with
senior investors.3
What is your firm doing to protect senior clients from abuses of trust in marketing, appropriate product selection, and other aspects of the relationship?
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Firms are required to implement internal compliance review and risk-assessment programs. How effectively you are doing that is a
key area of interest to examiners.
Compliance4
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and supervision.
Are the firm’s recommendations and investment decisions consistent with its stated polices and with its clients’ objectives and restrictions? Examiners
look especially closely at the use of derivatives in portfolios.
management.
Portfolio5
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Are the firm’s recommended brokerage arrangements consistent with its fiduciary responsibility to protect clients’ assets and interests?
best execution.
Brokerage arrangements
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6and
What policies and controls does the firm have in place to ensure fair allocation of trades and avoid favoritism toward certain clients?
trades.Allocation of
7
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What measures are firms following to ensure that its performance claims are accurate? The SEC says this continues to be an area of “high deficiencies.”
Performanceadvertising, marketing and fund distribution.
8
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Does the firm have effective policies to prevent theft, loss or misuse of client assets?
Safety of client assets.9
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Does the firm have effective procedures for capturing, maintaining, and reporting information in its books and records?
processingInformation10
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protection.and
on-going
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for the SEC should
preparedBeing
be an
process.
red flagsAre there any
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to be aware of?
Any firm with $100 million or more in equities in discretionary accounts must file quarterly 13F forms with the SEC listing those holdings and
their values. Failure to do so may trigger an examination.
Failure
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to make 13F filings.
Learn about more Red Flags to Avoid and The 12 Steps to Prepare for an Exam.
Download the free white paper from Advent Software.
www.Advent.com/SEC
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