SEC Exams of Investment Advisers - Top 10 List

SEC Exams of Investment Advisers - Top 10 List [Posted by by howard@compliance-insights.com]

Everyone loves a Top 10 List, and OCIE Director Lori Richards (SEC's Office of Compliance Inspections and Examinations) did not disappoint. C-I outlines OCIE's current "Top 10 Areas of Focus" and provides a link to the details.

..... 1. Controls Over Valuation. A firm's controls for valuing or pricing securities, with particular emphasis on structured products, illiquid securities or other difficult-to-price securities.
..... 2. Controls Over Non-Public Information / Personal Trading / Code of Ethics. Instances of suspicious trading have increased, so the SEC was to review a firm's controls to prevent insider trading in client, prop or employee accounts. They'll look at the firm's own compliance and supervisory programs.
..... 3. Dealing with Senior Citizens. Examiners are looking at free lunches, marketing, sales and related supervisory processes. Need we say more - it's nothing you haven't heard before.
..... 4. Compliance and Supervision. A key area; examiners want to understand the IA's compliance program to see if it appears designed to capture and manage that particular adviser's compliance risks. Has the adviser conducted a risk-assessment and ID'd its own compliance risks and conflicts of interest, then crafted and implemented procedures to effectively mitigate those risks. Recent conflicts: new revenue-sharing payment streams from IAs to BDs, so as to get on "recommended adviser lists.
..... 5. Portfolio Management. Examiners want to see if securities recommendations and investments made for clients and funds are consistent with the adviser's disclosures and the client's investment objectives and restrictions.
..... 6. Brokerage Arrangements and Best Execution. Brokerage arrangements must be consistent with fiduciary obligations to clients, and that IAs seek best execution, whether it uses soft dollars consistent with its disclosures, and whether the adviser periodically and systematically evaluates the costs and benefits of its brokerage arrangements.
..... 7. Allocations of Trades. Has the adviser disclosed its policies with respect to how it will allocate trades? Examiners look out for "cherry picking" and favoritism in allocations.
..... 8. Performance Advertising, Marketing and Fund Distribution Activities. Claims about past investment performance, ... must contain accurate information, and required disclosures (like conflicts of interest) are included in materials, pitchbooks, etc.
..... 9. Safety of Clients and Funds' Assets. Safeguarding clients' assets from theft. loss and misuse - including custodian arrangements and whether an independent custodian sends account statements directly to clients.
..... 10. Information Processing and Protection. A firm's controls over books and records, disclosures and filings; including business continuity plans.

Link: Speech by SEC Staff, 2/20
http://www.sec.gov/news/speech/2008/spch032008lar.htm?nl042408BLOG2

Lehman Opened Fed Spigot

Financial engineering helped get Wall Street into its current credit-market problems. Now, Lehman Brothers Holdings Inc. using a little engineering -- and some help from the U.S. Federal Reserve -- to bolster its finances. In recent weeks, Lehman moved $2.8 billion in loans, including some risky leveraged-buyout debt that has been difficult to sell, into a newly created investment vehicle it named "Freedom," which in turn issued debt securities backed by the loans. About $2.26 billion of the securities received investment-grade credit ratings from Moody's Investors Service and Standard & Poor's. Lehman then pledged some of the ...

Even beyond the credit crisis, the much-heralded Treasury secretary has failed to accomplish most of his own agenda. 5/12/08 Update from Portfolio.com The Problem with Paulson

Related Slideshow

Still demand for compliance and legal positions

Go to eFINANCIAL for this and other job news http://news.efinancialcareers.com/JOB_MARKET_ITEM/newsItemId-13201


Industry insiders say there is still demand for client service, investor relations, compliance and legal positions as firms work to keep existing clients from jumping ship during rocky economic times.

"The service side is still surprisingly active," says one senior executive with a top tier Chicago recruiting firm. In this volatile environment, he says, firms know they can't add new assets, so they're "over-delivering" on the service side. "Competitors are literally at the door, waiting to snap up the clients," says the recruiter. "You better have the right people in place to make the calls when you're down 30 percent."

Wide Demand

Service demand exists across asset management, from long-only institutional shops to hedge fund operations. Stuart Rosenthal, senior recruiter with Legend Global Search, sees healthy activity in legal and compliance, in addition to client service.

"We're seeing openings at some of the bulge bracket firms, as well as in the middle market," Rosenthal says. While firms are being "careful with budgets," they're adding attorneys, risk management, and service providers, he says. He also sees demand in the mid-salary range, and describes the market as competitive.

Somewhat Insulated

Even in the wake of Bear Stearns' meltdown, Chicago remains somewhat insulated from the market downturn compared to its coastal counterparts. Recruiters say asset management in Chicago is more diversified than in New York or on the West coast. While activity is slow, Windy City firms are not seeing a "deep dive" in asset management, as the head of one bank's institutional asset management sales force puts it.

"Chicago has been somewhat immune to layoffs," says Jim Geiger, vice president at Analytic Recruiting, which has a strong Chicago presence. "There's been a slowdown in hiring among MBAs and PhDs, but there is still hiring."

Seeking Experience

With so many layoffs, competition for jobs is at an all-time high, Rosenthal observes. Most firms are looking for people with strong backgrounds and experience. Even at the mid-salary levels, employers want someone who can hit the ground running.

"We're always looking at people with a track record," Rosenthal says. Geiger echoes that. "This is not a market where our clients are going to take a chance on someone who is new to the field," he says. "They want a track record or a specific niche."

Risk Management....Regulation, Net Capital Changes?

I am sure that you have seen the articles and are aware of the discussion on looming Regulatory changes. One battle is likely to be over risk-management and requiring higher cash reserves as a cushion against trading losses.

Fed Staff Monitor Investment Banks - Securities Law Prof Blog link and summary:
Federal Reserve staff onsite at five major investment banks to monitor their financial condition. Cox testified before Senate banking committee, amid inceased Congressional criticism of its performance. Senator Grassley asked SEC inspector general to review the 2005 investigation into Bear's pricing of mortgage-related assets, which SEC closed without filing charges.

WSJ, The Fed Hits the Street. Go to Securities Law Prof Blog w/wsj.com link
http://lawprofessors.typepad.com/securities/2008/04/fed-staff-monit.html

Did you know that in addition to the top Compliance and Legal talent in the marketplace, my network and database includes top Risk Management candidates?

Legend Global's proprietary database of contacts together with my own network built on a 20 year-Regulatory and Compliance career provides insight not available from anywhere else. Legend's website shows the breadth of our services including an overview of the types of jobs we fill: www.ComplianceHQ.com.
Please let me know how and when I can help and I will devote manpower to meet your need(s).

Stuart Rosenthal | Legend Global Search, Inc. | 212.293.8920 SRosenthal@ComplianceHQ.com

Links
http://online.wsj.com/article/SB120631764481458291.html?mod=rss_markets_main

In Washington, a Split Over Regulation of Wall Street http://www.nytimes.com/2008/03/23/business/23regulate.html?_r=1&ref=business&oref=slogin">

Regulatory Underkill: Arthur Levitt, former SEC Chair, calls for regulatory reforms in a Wall St. Journal op-ed piece including: How we can inject greater transparency into the markets and bring about a change in attitude on the part of business leaders and policy makers that puts the interests of investors first. This may require a more fundamental restructuring of how we regulate the markets -- for instance, merging the SEC and the CFTC to create a single securities regulator -- and giving that regulator the resources and the authority to do its job, something the SEC currently lacks.
WSJ Op-ED link http://online.wsj.com/article/SB120605716375753327.html?mod=todays_us_opinion

SEC Chair Cox last week sent letter to chairman of Basel Committee on Banking Supervision expressing strong support for planned updated guidance on liquidity management for banking organizations in light of the recent market turmoil. Chairman Cox Letter to Basel Committee in Support of New Guidance on Liquidity Management March 21, 2008 in SEC Action http://www.sec.gov/news/press/2008/2008-48.htm

Relocating to NY? Looking for place to live or an Architect?

Real Estate/Relocation:NY/elsewhere
Click here
http://www.prudentialelliman.com/mainsite/agents/agents.aspx?BID=JOHH

Need an Architect? Call 973-980-7538 or e-mail Archichix@msn.com.

Be sure to mention Compliance HQ.

Compliance Insights:up-to-the-minute analysis in Compliance and Financial Service

Go to https://www.compliance-insights.com/index.html

Compliance Headquarters - Legend Global Search

http://www.compliancehq.com/

Current Compliance and Legal Openings

Search current opportunities anytime
http://www.compliancehq.com/compliancehq.php

Listings updated daily. Use multiple keywords, phrases

Receive E-mail Job Alerts or Monthly Newsletter - Click link Sign up
http://www.compliancehq.com/cgi-bin/registration.cgi

We don’t limit ourselves to one or two areas of financial services compliance. We handle all. our knowledge base and experience ensure that we don’t spread ourselves too thin. Whether broker-dealer, investment advisory, banking or asset management, we identify the best of the best at every level. Our network allows us to find the right analyst, officer, manager, or chief compliance officer for each company’s unique staffing requirements.