On March 23, 2020, the SEC’s Office of Compliance Inspections and Examinations (OCIE) announced that it will conduct its examinations of SEC registrants through correspondence, unless it is absolutely necessary to be on-site. On the same day, the co-directors of the Division of Enforcement issued a statement underscoring the importance of maintaining and following corporate controls and policies. Notwithstanding current remote work environments, the staff of both OCIE and the Division of Enforcement reiterated that they remain committed to their mission of protecting investors.
Chief compliance officers and other compliance personnel should carefully consider whether their firms’ compliance policies and procedures will continue to function as designed under the current circumstances. In particular, CCOs of registered investment advisers should step up monitoring for improper dissemination and use of material non-public information, and ensure that they continue to receive and review personal securities trading records of all access persons. Monitoring dissemination of information to external consultants should also be increased.
OCIE acknowledged that “health and other measures necessitated by COVID-19 may significantly alter the operations of registrants in the securities markets.” As a result, OCIE will work with registrants to address the timing of its examination requests and to take into account the availability of registrants’ personnel, in an effort to minimize further disruption to registrants’ business. That said, OCIE remains fully operational and will try to conduct its remote exams in a manner that is generally consistent with its normal operations, keeping in mind necessary and appropriate health and safety measures. Registrants should expect OCIE to include in its upcoming exams questions related to the implementation and effectiveness of registrants’ business continuity plans.
OCIE also reassured registrants that reliance on certain recently granted regulatory relief (see our related client alert) will not be a risk factor utilized in determining whether OCIE commences an examination.
Particularly in light of current market volatility, CCOs should remind access persons of their responsibilities under compliance policies and procedures and their firms’ codes of ethics. CCOs can support portfolio, trading and other personnel to ensure that the best interests of the firms’ clients are appropriately protected in these difficult times.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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