Taking custody verification of customer assets out of the hands of examiners and putting it in the computer age is among the goals of Andrew “Drew” Bowden, the Securities and Exchange Commission’s executive in charge of investment advisory oversight.

“Instead of having an examiner contact a custodian’s office to manually verify custody, it would be much more efficient for us to have custodians transmit customer holdings confirmations electronically," said Bowden, deputy director, SEC Office of Compliance, Inspections and Examinations.

Bowden spoke to Financial Advisor magazine in his office yesterday. At 51, his career has included stints as general counsel and chief operating officer for Legg Mason Capital Management. Before coming to the SEC, Bowden served on the board of governors and executive committee of the Investment Adviser Association. The attorney received his law degree from the University of Pennsylvania.

Q: Are there any ways remote examinations could be incorporated into the current system to gather information not already contained in required filings that would help find problems within firms?

Bowden: Remote “exams” are currently done to an extent. In our regional offices, staff will do due diligence on firms as they develop examination plans. Their preparatory due diligence includes looking at news reports, the advisors’ Web sites, third-party databases and the Investment Adviser Registration Depository and other regulatory databases for information including marketing and performance claims.

Q: Why are people from the SEC’s Enforcement Division accompanying your workers on exams?

Bowden: It is the exception not the rule for enforcement staffers to be at an exam. Sometimes enforcement workers come for training. Other times, we bring someone in from enforcement because he or she is a specialist at the SEC in a niche area, perhaps oil and gas limited partnerships. Enforcement people are also present when there are collaborative exams with trading and markets, investment management and other SEC units. We always tell registrants when there is staff from enforcement present, although we do not tell why.

Q: What are the specific concerns on sub-accounting payments to broker-dealers?

Bowden: Our concern is that the large amount of shareholder dollars investment companies are paying to broker-dealers that do shareholder and administrative services are fair and reasonable and the result of arm’s length negotiations. We also want to make sure the payments are for those services and not to get the favor of the broker-dealers.  Distributors have a lot of leverage.

Q: What kinds of things specifically is your unit interested in regarding alternative mutual funds?

Bowden: We are particularly focused on financial products such as private placement and other non-traditional assets where accurate and timely valuation can be tricky and there is low liquidity.