SEC Provides Results of Examinations of Advisers and Funds That Outsource Their Chief Compliance Officers

After conducting nearly 20 examinations as part of an Outsourced CCO initiative that focused on SEC-registered investment advisers and investment companies that outsource their CCO role to third parties, the SEC has issued a national program risk alert to assist industry participants with the growing trend.  

Specific staff observations from the alert included:

• Outsourced CCOs who frequently and personally interacted with advisory and fund employees (in contrast with impersonal interaction, such as electronic communication or pre-defined checklists) appeared to have a better understanding of the registrants’ businesses, operations, and risks.
• More significant compliance-related issues were identified at registrants with an outsourced CCO that served as the CCO for numerous unaffiliated firms and that did not appear to have sufficient resources to perform compliance duties, especially given the disparate and dispersed nature of the registrants that the CCO serviced.
• Annual reviews performed by outsourced CCOs, who were able to independently obtain the records they deemed necessary for conducting such reviews, more accurately reflected the registrants’ actual practices than annual reviews conducted by CCOs, who relied wholly on the firm to select the records subject to their review. 

Read the entire National Exam Program Risk Alert