| This issue of Venable's Fund Forum features two articles on recent guidance from the SEC: the use of outsourced CCOs, and the 2016 OCIE examination priorities. During this election season, we also want to remind fund managers about important political pay-to-play rules. Finally, we address a common question for foreign Exempt Reporting Advisers under Dodd-Frank: What does "exempt" mean, anyway? |
SEC Focus on CCO Outsourcing: A Way Forward
The SEC Initiative Re: Outsourced CCOs
There has been increasing regulatory scrutiny about the trend of outsourcing the Chief Compliance Officer (CCO) function to third parties. Late last year, the SEC published findings of approximately 20 examinations as part of an Outsourced CCO Initiative that focused on SEC-registered investment advisers that outsource their CCOs to unaffiliated third parties. The initiative was conducted by the Office of Compliance Inspections and Examinations (OCIE) of the SEC. In the Risk Alert, the staff shared certain observations regarding effective outsourced CCOs and restated their first principles and long-standing guidance on the role and importance of a CCO.
In this article we discuss the Risk Alert and a way forward for CCOs.
SEC's OCIE Announces Examination Priorities for 2016
The Securities and Exchange Commission (SEC) recently announced the 2016 examination priorities of its Office of Compliance Inspections and Examinations (OCIE). OCIE's 2016 examination areas primarily reflect a continuation of three thematic areas identified in 2015: (1) protecting retail investors and investors saving for retirement; (2) assessing market-wide risks; and (3) utilizing data analytics to identify and examine potential illegal activity. Additionally, the SEC identified several new areas of examination focus, including liquidity controls, public pension advisers, product promotion, and "two popular investment products" – exchange-traded funds (ETFs) and variable annuities.
Pay-to-Play Pitfalls to Avoid in 2016
With the 2016 election around the corner, fund managers who wish to engage in the political process must be careful to comply with the federal, state, local, and even fund-specific "pay-to-play" rules that govern their political giving. These laws and regulations impose limits or even outright bans on political contributions by fund managers, their PACs, subsidiaries, directors, officers, and employees involved in soliciting business from government entities.
Pay-to-play laws vary widely, creating a compliance challenge for companies doing business in multiple jurisdictions. Continue reading our review of the scope of federal, state, and local regulations governing pay-to-play.
What Does "Exempt" Mean, Anyway?
Five years have passed since the imposition of new requirements for Exempt Reporting Advisers under the Dodd-Frank Act. At the time the rules were enacted, they were controversial in that the burden imposed on foreign Exempt Reporting Advisers was substantially similar to that of Registered Investment Advisers. Even with the passage of time, they have become no less controversial or cumbersome.