SEC making greeting calls to new registrants

Soon after registering, CCOs can expect a phone call to discuss their business and background with SEC staff.  

After registering the firm with the Securities and Exchange Commission (SEC), one of a compliance officer’s first duties is spending 30 to 60 minutes chatting with a SEC representative.

Compliance officers speaking to pfm said these conversations generally cover the firm’s investment strategy and history, as well as the CCO’s personal background and credentials. One CCO said receiving the call so soon after registering “was a little nerve-wracking” and made him keenly aware that he was now under SEC supervision.

At the recent CFA Institute conference in Boston, Drew Bowden, the SEC’s chief inspector, confirmed the calls were being made. Taking questions from the audience, Bowden said the point of the calls “wasn’t to freak people out” but to gather information, better understand the registrant’s business and “allow the SEC to be present” for firms that may not receive a formal exam for years.

Inspectors spend six to eight hours preparing before making the call, according to Bowden. So far 40 of these calls have been made, all from the Boston, Chicago, San Francisco, Los Angeles and New York regional offices.

At the event, Bowden also provided an update on the presence exam initiative kicked off in 2012. An estimated 1,200 private fund advisors registered with the SEC since 2012. The SEC wants to inspect 25 percent of these firms by end of year. Already 370 newly-registered firms have been inspected, according to Bowden, meaning the commission has reached its goal. However, Bowden said he now aims to inspect 400 newly-registered firms before the presence exam initiative is completed.