SEC Exam Priorities for 2014

SEC National Exam Program

Last year the Office of Compliance Inspections and Examinations at the Securities Exchange Commission laid out their examination priorities for 2013. Apparently, it is now an annual event. OCIE published its 2014 Examination Priorities.

For advisers and fund managers the priorities list three core risks:

  1. Safety of Assets and Custody
  2. Conflicts of interest in the business model
  3. Marketing and performance

There are six new and emerging issues and initiatives.  For most private equity and real estate funds, there is nothing new here.

  1. Never-before examined advisers
  2. Wrap fee programs
  3. Quantitative trading models
  4. Presence exams
  5. Payments for distribution
  6. Fixed income investment companies

We know the SEC has been trying to get in the door at lots of newly registered fund managers and has been using the presence exams model. As of September 30, the SEC had conducted over 200 presence exams, which apparently is on track to touch 25% of the newly registered advisers. A commendable goal.

Under the Policy topics there is something that caught my eye:

“Alternative” Investment Companies. The staff will continue its assessment of funds offering “alternative” investment strategies, with a particular focus on: (i) leverage, liquidity and valuation policies and practices; (ii) the staffing, funding, and empowerment of boards, compliance personnel, and back-offices; and (iii) the manner in which such funds are marketed to investors. The staff will additionally review the representations and recommendations made regarding the suitability of such investments.

There is no color to the term “alternative” so it could encompass private equity and real estate funds.



  1. SEC Compliance Outreach Program National Seminar | Compliance Building - January 31, 2014

    […] Investors and the SEC relies on compliance officers. OCIE has only 450 dedicated who have to look over 11,000 registered investment advisers. The top goal is getting firms to express a dedication to compliance throughout the organization. She highlighted the exam priorities for 2014. […]