Exam watch: Do you have the resources you need? The SEC wants to know

Are you afforded the authority required to perform your role? Does your budget allow you to implement an effective compliance program? SEC examiners are actively seeking answers to these and other pointed questions during inspections.

This line of questioning is part of the regulator's strategy to collaborate more effectively with CCOs. “We are committed to working closely with chief compliance officers and enhancing their ability to oversee compliance at fund firms,” SEC chairman William Donaldson said in a speech last week before the Mutual Fund Directors Forum.

In a recent routine examination request list letter, the SEC details specific information and lists documents examiners seek which speak to the “competence, knowledge, independence and activities of the chief compliance officer.”

In the initial request for information, SEC examiners expect to be furnished with:

• an organizational chart showing the position of the CCO;
• the compliance budget;
• all requests the CCO has made for resources and responses to those requests;
• the CCO's opinions regarding the adequacy of resources available to establish and implement an effective compliance program, including a detailing of all work the CCO would like to do but has not been given the resources to do;
• the CCO's opinions regarding his/her authority to administer fully and competently the registrant's compliance program;
• the CCO's description of the process for obtaining information from service providers regarding their compliance program and compliance problems;
• the CCO's description of his/her interaction with compliance staff of service providers and oversight of service providers compliance programs;
• CCO's educational experience and background;
• CCO's compensation package;
• all reports the CCO got from service providers; and
• the registrant's code of ethics and all documents related to the administration of the code.

The SEC is asking to see the following information for the inspection period regarding how you're capturing information as part of your overall compliance program:

• the nature of the breach or issue;
• how the breach or issue was initially detected;
• the date or period of occurrence;
• the persons involved;
• any monetary impact on clients;
• how the breach or issue was resolved;
• how the breach or issue was reported to management; and
• a description of the relevant information available for review.