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OCIE Issues Alert on Investment Adviser Supervision of Individuals with Disciplinary Histories

The SEC Office of Compliance Inspections and Examinations ("OCIE") identified compliance deficiencies in the oversight practices of SEC-registered investment advisers who employ individuals that have a history of disciplinary events.

In a Risk Alert, OCIE staff highlighted (i) inadequate disclosures regarding disciplinary events and (ii) the failure to implement policies and procedures to address the risks of hiring individuals with disciplinary histories. OCIE staff made the following recommendations:

  • adopt procedures that mandate background checks or other processes that must occur before any hire;

  • identify disciplinary events by reviewing new hires' Form U5 filings;

  • establish heightened supervision for employees with poor disciplinary histories;

  • address clients' complaints regarding these employees; and

  • establish oversight for employees operating out of remote offices.

Primary Sources

  1. OCIE Risk Alert: Observations from Examinations of Investment Advisers - Compliance, Supervision and Disclosure of Conflicts of Interest

Tags

Regulated Activities
Employee Matters Supervision / Compliance
Sub-Activity
Statutory Disqualification
Regulated Entities
Adviser / CTA / CPO
Body of Law
Securities Law
Jurisdiction
US - Federal
Organization
SEC