Conquering Current Compliance Challenges
Aug. 14, 2019 | 2:00 - 2:30 PM EST
 
RECORDED WEBINARS

Conquering Current Compliance Challenges
Recorded: June 11, 2019 
 
Includes: Best Practices, Key Regulatory Issues and Compliance Tips
 
Includes: 23 Best Practices, 5 Peer-tested tools and 15 No Action Letters


 
FEES AND EXPENSES OVERVIEW

Investment advisers employ a variety of fee structures for the services they offer to clients. In its 2015 Exam Priorities letter, OCIE stated that where an adviser offers a variety of fee arrangements, it will focus on recommendations of account types and whether they are in the best interest of the client.  The fees charged, services provided, and the disclosures made about such relationships will be scrutinized.
 
In 50% of the private equity presence exams the SEC conducted, examiners found problems around fees and expenses. Given the high rate of deficiencies, OCIE has stated that it will continue to conduct examinations in this area.
 
In the document request letters used for presence exams, firms were asked to hand over all lists of compensation, a schedule of all fees earned, total expenses, a list of “broken deals” and their expenses as well as any compliance P&Ps for “disclosing, calculating and testing fees.”  New exams are likely to also home in on these areas.

Disclosure issues

Poor disclosure is a frequent source of exam findings. Be sure to disclose the fees you are taking. 
The SEC has stated that an investment adviser charging fees substantially exceeding those charged by other investment advisers may be in violation of Investment Advisers Act section 206 unless it discloses that such a fee is higher than that charged by other advisers providing similar services.
 
The payment of fees to others is also an SEC focus.  Advisers Act rule 206(4)-3 generally prohibits the paying of a cash fee, directly or indirectly, to a third party for referring clients to an  adviser unless the arrangement complies with a number of conditions.
 

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