Three Inspection Points From OCIE Alumni

Three Inspection Points From OCIE Alumni

I attended a recent program sponsored by Winston & Strawn and Promontory Financial Group. Among the speakers were two former senior officials from the SEC’s Office of Compliance Inspection and Examination (OCIE). The program focused on SEC inspections of investment advisers. The two former OCIE officials made the following points that are applicable to all OCIE inspections:

1. Referral to Enforcement. Only some 6 to7% of OCIE examinations are referred to the SEC’s Enforcement Division;
2. Likelihood of Enforcement Action from a Referral. The Enforcement Division staff attorneys receive referrals from many sources- OCIE, FINRA, public complaints, Whistleblowers. In choosing which to pursue the staff will be guided in part by which cases are more likely to bring them some sort of reward- promotion, awards, publicity, etc.;
3. When to involve outside counsel during an inspection. This is a fact specific issue. How serous is the alleged deficiency; is it a repeat of a deficiency cited in a prior exam; is it in an item that the SEC has listed on their annual report of things they are focusing on in their inspection program.

Please feel free to contact me (phone 212 455 0476, email msimkin@securitiesregslaweyr.com) with any questions, comments or to discuss this further.