The Securities and Exchange Commission this week released its July 2008 compliance letter that identifies common deficiencies and weaknesses found by examiners during recent compliance exams of SEC-licensed registered investment advisors and other financial services firms. By spotlighting shortfalls, the agency's ComplianceAlert letter aims to be a tool to help firms boost their regulatory compliance.
The recent letter followed a similar ComplianceAlert letter released in June 2007. Both are based on compliance exams conducted by the SEC's Office of Compliance Inspections and Examinations of investment advisors, investment companies, broker-dealers, transfer agents and other types of SEC-registered firms. The July letter tackles various areas ranging from personal trading by RIA employees and soft dollar practices by advisors, to broker-dealer valuations and issues identified at broker-dealers affiliated with insurance companies.
For example, the list of frequent deficiencies regarding personal trading by RIA employees include incomplete code of ethics at advisory firms, code of ethics not followed by employees, and inaccurate disclosure.
What makes for an effective compliance program? In its letter, the SEC commended those firms that not only provide employees with a mandated code of ethics, but also provide training in the policies and require employees each year to acknowledge in writing that they read the code of ethics.
The complete ComplianceAlert letter can be accessed on the SEC website at http://www.sec.gov/about/offices/ocie/complialert0708.htm.