A CCO, who asked not to be identified, is in the middle of an OCIE exam. The examiner came with a new inquiry – about the firm’s BCP given the coronavirus outbreak.
Sister title Regulatory Compliance Watch has obtained a copy of an OCIE sweep exam letter prompted by covid-19. It confirms the interest stated by the CCO. Examiners requested copies of the firm’s BCP and related compliance P&Ps. The letter also asked if the plans are “specific to pandemics.”
In a new statement, OCIE pledges that it is “fully operational nationwide,” but also states – given the outbreak – that “OCIE has moved to conducting examinations off-site through correspondence, unless it is absolutely necessary to be on-site.”
Other sources have verified that new OCIE exams are virtual only, not in-person, a logical development given the pandemic.
Recognizing our present menace
The new OCIE release promises to “work with registrants” being examined, in recognition of the difficulties some firms are experiencing. OCIE also acknowledges the sweep exam. “OCIE is actively engaged in on-going outreach and other efforts with many registrants to assess the impacts of covid-19,” it reads. “OCIE may discuss with registrants the implementation and effectiveness of registrants’ business continuity plans.”
The sweep letter obtained by RCW also asked for written responses to a series of related questions and descriptions. “Briefly describe some of the aspects of the BCP that are particularly applicable to maintaining continuity of business operations when dealing with the covid-19 pandemic,” the letter reads.
It’s not uncommon for OCIE to reach out during times of crises. “These types of communications should not be a cause for alarm – the SEC is conducting this outreach to better monitor the markets and understand market risks at a macro level. However, every money manager should prepare for this type of outreach in advance,” writes Paul Hastings. “The easiest way to avoid potential issues if the SEC comes knocking is to adhere to, and follow, existing policies and procedures.”
The sweep exam letter also asked if the adviser has found “any preliminary weaknesses or unforeseen issues” since implementing their BCP. Other questions pursued the adviser’s ability to monitor vendors when working from home. The adviser is asked whether its vendors review and update their BCPs and have disaster recovery plans, “such as identifying the locations where data is backed up.”
A situation lasting ‘months’
Perhaps most noteworthy, the OCIE request raises the specter of a long stretch of working from home. “Is [your] firm prepared to have all of its personnel operate remotely for several weeks (e.g., three-plus) or months, if required or appropriate …. Does the firm have a contingency plan” if staff must work from home “for several weeks or months,” the document asks, adding special concern for staff who must care for children.
“Has the COVID-19 pandemic created hardships for the firm (e.g., financial, human resources, or otherwise)?….What other issues or concerns does the firm want to share with the SEC?” the document asks.
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