Update: SEC Compliance Insights From CCO Outreach Program

The U.S. Securities and Exchange Commission hosted a National Compliance Outreach Event via live webcast for investment advisers and investment companies on November 7, 2024. Co-sponsored by the Division of Examinations, Division of Investment Management, and the Division of Enforcement, it is intended to help Chief Compliance Officers (CCOs) and other senior personnel at investment companies and investment advisory firms enhance their compliance programs for the protection of investors. 

For those who missed the comprehensive program, a recording is available on the SEC's website. Here are some essential takeaways across key compliance areas:

Information Security & Operational Resiliency

Key focus areas for operational security include:

• Implement comprehensive monitoring of off-channel communications
• Conduct continuous cybersecurity training for employees
• Ensure strict vendor management with thorough due diligence
• Develop clear breach notification processes
• Align policies precisely with actual business practices

Registered Investment Company (RIC) Compliance

Critical considerations for investment companies:

• Accurately describe derivative and private credit fund strategies
• Ensure timely regulatory filings
• Maintain accurate marketing materials
• Provide comprehensive board oversight of compliance programs
• Conduct thorough examinations of process effectiveness

Private Fund Adviser Requirements

Essential compliance focus for private fund advisers:

• Carefully validate performance calculations
• Transparently handle hypothetical performance
• Provide accurate disclosures in Form ADV 2
• Manage Material Non-Public Information (MNPI) rigorously
• Scrutinize conflicts of interest and fee structures

Marketing Rule Implementation

Key marketing rule compliance priorities:

• Comprehensively cover pitchbooks and websites
• Use testimonials and endorsements carefully
• Report performance accurately
• Avoid misleading claims about technological capabilities
• Recalculate performance when fee structures change

Regulatory Hot Topics

Emerging regulatory focus areas:

• Adapt to T+1 Settlement requirements
• Develop robust AI compliance procedures
• Ensure accurate AI-related disclosures
• Prepare for AML reporting requirements
• Maintain operational, interactive advisory platforms

Final Insights

The SEC's consistent message emphasizes the critical importance of transparency, accuracy, and proactive compliance. Investment advisers must remain vigilant, continuously update their practices, and prioritize investor protection.