OCIE Warns against Outsourcing CCOs to Third Parties
From the Desk of Jim Eccleston at Eccleston Law LLC:
A November Risk Alert detailed that, after much examination of investment advisors and companies, OCIE staff recognized several downfalls accompanied with outsourced CCOs, including compliance policies and procedures failures, risk assessment inconsistencies, and the inability to conform compliance manuals to companies’ businesses and practices.
OCIE staff conducted about twenty examinations on registered SEC investment advisors and companies that outsource their CCOs as part of their Outsourced CCO Initiative. OCIE stated that the main purpose of this Risk Alert was to raise awareness of the numerous compliance issues that arise when companies outsource CCOs to unaffiliated third parties. The Commission stated that a fund’s CCO should be “competent and knowledgeable regarding the federal securities laws and should be empowered with full responsibility and authority to develop and enforce appropriate policies and procedures for the fund.” OCIE staff also noted that the outsourced CCOs used standardized checklists to gather information, but the staff cautioned that the use of generic lists do not fully capture business models, practices, or strategies. The staff hopes that the publication of this assessment will allow business to properly asses the work from their outsourced CCOs, and fix any weaknesses in their compliance programs.
The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services.
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