Office of Compliance Inspections and Examinations alert on advisory fee and expense compliance issues

On April 12, 2018, the US Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (“OCIE”) released an alert highlighting the most frequent fee and expense compliance issues identified during investment adviser examinations.1 While these identified deficiencies do not necessarily constitute violations of law or regulation, they reflect breakdowns of operating controls that could lead to inadvertent breaches of fiduciary duty. The alert, coupled with other recent SEC actions, provides critical insight into regulatory focus areas and expectations regarding advisory programs. As discussed in Deloitte’s2 recent white paper, The Rewards and Risks of Managed Account Programs, advisory accounts are an ever-increasing area of focus for regulators as growth continues to accelerate across the industry, surpassing $6T in total assets in Investment Advisory solutions at the end of 2017.3 Firms should carefully consider the OCIE alert and explore the tools and services available to support advisory program compliance while prioritizing, planning, and executing their risk management efforts.

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