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After five months of review, the SEC’s Office of Compliance Inspections and Examinations (OCIE) has released a Risk Alert regarding compliance and process protocols during the era of COVID-19. As the pandemic continues, investment management firms have been challenged to maintain the high-quality service and standards their clients and the SEC demand.

OCIE Identifies Six Areas of Concern

Firms should take time to review:

  • protection of investors’ assets
  • supervision of personnel
  • practices relating to fees, expenses, and financial transactions
  • investment fraud
  • business continuity
  • the protection of investor and other sensitive information

In this series, you’ll get a detailed breakdown of each of these six areas of concern.

Best Practices Relating to Fees, Expenses, and Financial Transactions

Due to the volatility of the markets caused by the COVID-19 crisis and increased frequency of losses for one reason or another, the SEC will likely bring more attention to transparency requirements. Service costs and management fees, firm compensation, and key personnel actions should all be monitored for conflicts of interest in the current environment.

Specifically, OpsCheck can memorialize compliance procedures to give heightened attention to actions by the firm and staff that may involve asset transfers into products and services that the firm has a direct involvement in soliciting or borrowing or taking loans from investors.

Firms may be seeking to recover certain losses through higher fees such as termination of accounts or upcharges on investment transfers. Notification and transparency rules for these fees and any changes should be stringently applied to maintain the firm’s integrity and reputation as well as compliance with SEC regulations.

Keep an Electronic Paper-Trail

Maintaining an electronic paper-trail through OpsCheck to demonstrate regulatory compliance will protect the firm against accusations of wrong-doing. To protect against such legal risks, firms should review the accuracy of disclosures, valuation procedures, and fee calculations.

Again, with increased market volatility, unusual client transfer activity, and potential firm capitalization needs, firms should take the extra step of reviewing that all moves are in the best interest of their clients and updating their procedures to reflect this attention.

Looking to learn more about industry best practices? OpsCheck brings the best parts of innovative software to a centralized product focused on Financial Control.

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