SEC to Focus on “Never-Been-Examined” Advisers

Investment Management Update

Date: November 04, 2013

The Dodd-Frank Act caused thousands of advisers to private investment funds, such as hedge funds, to register with the Securities and Exchange Commission (SEC). Many of these advisers have never been examined by the SEC. That is about to change.

Last week, the director of the Office of Compliance Inspections and Examinations (OCIE) announced plans to examine at least half of those advisers in 2014. The principal focus of any investment adviser examination undertaken by OCIE is to determine whether investment advisers have adopted appropriate written compliance policies and procedures as required under the Investment Advisers Act of 1940 (Advisers Act). Failing to demonstrate compliance with these and other requirements can have profound repercussions on an adviser.

The Time to Strengthen Your Compliance Program Is Now

Thompson Hine’s Investment Adviser Compliance Team assists registered investment advisers in meeting their regulatory obligations by providing an independent analysis of the adviser’s compliance program, including the written compliance policies and procedures required under the Advisers Act.

Rather than applying a one-size-fits-all approach, we tailor our efforts, both in scope and fees, to meet each adviser’s needs. However, a typical engagement is likely to include:

  • Risk Assessment. We evaluate the operational and regulatory risks confronting the organization.
  • Staff Interviews. To gain a complete understanding of the adviser’s operations and to validate/confirm the risk assessment results, we interview the adviser’s key personnel.
  • Review of Form ADV. For newly registered advisers, Form ADV, especially Part 2, can be daunting. We review the ADV against the results of staff interviews and the risk assessment to ensure that disclosure in the ADV is consistent with the adviser’s operations.
  • Review of Written Compliance Policies and Procedures. Based on the risk assessment results and staff interviews, we review compliance policies and procedures to determine whether they are reasonably designed to meet the risks identified in the risk assessment and, most importantly, to ensure that they are consistent with the adviser’s actual operational practices.

In addition to the foregoing, advisers may choose from the following services:

  • Annual Review. Rule 206(4)-7 under the Advisers Act requires each registered investment adviser to review its written policies and procedures at least once per year. As part of this service, we conduct a comprehensive assessment of the adviser’s compliance program, including reviewing operational and transactional information, and provide a written report of our findings.
  • Mock Regulatory Examination. For advisers who are concerned they may be unprepared to adequately respond to an SEC examination, our team of attorneys with SEC experience conduct a mock examination of the adviser based on current enforcement trends and other relevant issues.

To offer maximum value and service, we will work alongside your current counsel to preserve independence, and under a fixed fee arrangement.


For more information, please contact:

Richard S. Heller

Michael V. Wible

Cassandra W. Borchers

Craig A. Foster*

*Craig is not licensed to practice in Ohio; he is admitted only in Oregon.


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