SEC Explores Ways to Strengthen Compliance of Independent Advisers

SEC Explores Ways To Strengthen Compliance Of Independent Advisers (Mark Schoeff, Investment News) – At a recent compliance conference, the acting director of the SEC’s Office of Compliance Inspections and Examinations (OCIE) noted that the SEC has increasing concern about the rise of independent advisers affiliating with RIA platforms as “1099” advisers, as opposed to investment adviser representatives who are salaried employees of the RIA. The problem is that SEC examiners are finding a different level of compliance amongst employee representatives versus independents, who almost by definition are more independent and less tied to the parent RIA, and therefore may be less tied to the firm’s compliance oversight and processes, not unlike the challenge of overseeing independent 1099 brokers at an independent broker-dealer. As a result, acting director Peter Driscoll suggested that the SEC may soon publish a Risk Alert about the issue, implying that RIAs with independent 1099 advisers may soon get more scrutiny about how they exercise compliance oversight of those advisers in their upcoming SEC exams (which, although infrequent, are trending higher as OCIE tries to increase its exam cycle frequency). Notably, though, the top SEC concern for advisors at this point is still cybersecurity, and there will likely be more guidance forthcoming on that issue soon as well.

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