SEC Staff Highlights Compliance Deficiencies of New Advisers

In a new Risk Alert, the SEC Division of Examinations (the "Division") highlighted compliance deficiencies of newly registered investment advisers.

The Division examined newly-registered advisers for, among other things, conflicts of interest and adequacy of disclosures.

The Division observed the following deficiencies:

• compliance policies and procedures that (i) failed to address risks applicable to the firm, such as portfolio management and fee billing, (ii) lacked procedures for enforcing compliance policies and (iii) were not followed by firm staff because either the employees were unaware of the policies and procedures or they were not consistent with their firm’s business operations;
• disclosure and document filings that omitted required information or were inaccurate regarding advisers' (i) fees and compensation, (ii) business or operations and (iii) services offered to clients, such as advisers’ investment strategy, aggregate trading and account review; and
• marketing materials that contained false or misleading information regarding advisory personnel professional experience, third-party rankings and performance.