Even four years on from Dodd-Frank pushing most of the industry under the SEC’s spotlight in 2012, private fund managers still have plenty of questions about what it takes to clear the exam process. The SEC has developed a deeper understanding of the industry’s workings, leading to more nuanced, targeted exams.
So in light of clients’ compliance challenges, Navatar teamed up with the Association for Corporate Growth, a mid-market trade body that helps private fund managers monitor emerging regulatory issues, and took the conversation to a SEC funds examiner for more perspective as part of a roundtable discussion.
Watch and read transcript: “The SEC Staff Answers Your Burning Questions on Examinations.”
Five of our clients’ exam-related questions stood out to us in particular. Below, we paraphrase responses from Maryellen Maurer, a SEC funds examiner:
1. Can a CCO wear multiple hats?
Large firms have the resources to hire dedicated compliance chiefs. That’s less true for smaller outfits, who often double the CFO as CCO. Is that a problem? No, so long as the person juggling multiple roles can handle it. But often dual hatted CCOs spend less than 50 percent of their time on compliance, Maryellen warned during the roundtable. That can lead to problems if the CCO only pays lip service to compliance. Maryellen said these CCOs can discuss in detail trading rules, a familiar area for CFOs, but struggle to apply the same specificity to other compliance areas. Meanwhile CCOs that understand all the firm’s processes, and don’t need to schedule many meeting to answer follow-up questions, provide examiners assurance.