The Securities and Exchange Commission is raising the bar for mutual fund companies’ compliance programs, having found 40% of such programs deficient in 2006, according to a new white paper from SEI Investments. Another reason the SEC has higher standards is because of its CCOutreach programs, which are meant to better educate fund compliance and regulatory staff.
All of this is despite the fact that the SEC hasn’t enacted any new rules this year. Of the 52 CCOs and fund executives that SEI surveyed, 84% said the SEC’s requests have become more onorous, asking for more information ahead of exams and tougher questions once examiners arrive.
“The SEC’s message to the industry is clear: It expects to see significant improvement in compliance programs,” said Jim Volk, chief compliance officer at SEI’s investment manager services division. “The bottom line is that senior management must be more involved with compliance, and CCOs have to be more alert than ever before. We’re in a new era of compliance that requires heightened awareness.”
One recommendation that SEI makes is to stay on top of the SEC’s key concerns, or hot-button issues, as these are always changing. Currently, according to SEI, the SEC is most concerned with the use of non-public information in investment decisions, undisclosed fee arrangements, soft-dollar brokerage arrangements, best execution, risk management, and pricing and valuation methods.
Firms should also have policies setting forth a firm-wide culture of compliance and annually audit their compliance programs for missing policies and procedures.