Compliance Considerations for SEC registered firms


The main compliance issues facing firms during COVID-19 includes the supervision of employees and business continuity amid uncertainty. The SEC Office of Compliance Inspections and Examinations (OCIE) released a risk alert on August 12 to share some observations with registered firms, investors, and the public generally.

The observations came after staff observations on areas of risk as well as consultation and coordination with SEC colleagues and other regulators. The office has been reaching out to SEC registrants to better understand the impact the virus’s spread was having on their ability to fulfil compliance mandates and business continuity.

The OCIE has identified a number of COVID-19 related issues, risks and practices relevant to SEC-registered investment advisers and broker-dealers, including:

  • Poor oversight of supervised persons’ investment and trading activities
  • Inability to perform the same level of diligence during background checks when onboarding personnel
  • Heightened risk of investment fraud through fraudulent offerings
  • The potential loss of sensitive information

“Additionally, market volatility related to COVID-19 may have heightened the risks of misconduct in various areas that the staff believe merit additional attention.” The Risk Alert said.

The OCIE asked firms to review their continuity plans to address issues. Compliance policies and procedures should be given the right attention and updated as needed. Companies should also provide disclosures to investors if their operations are impacted by the pandemic.

The office risk alert is an ongoing attempt from regulators to protect firms, investors, and the market from misconduct. In March 2020, the SEC announced “We are actively monitoring the markets to detect potential fraudsters who seek to use the COVID-19 crisis as a basis for investment scams” - Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement.

OCIE encourages firms to be aware of frauds and report fraudulent activities. To read the full Risk Alert, visit the SEC OCIE page.

To know more about this Risk Alert, consider registering for our upcoming Live Webinar with Duff & Phelps. Our Asia-Pacific Director, Kelly-Ann McHugh will host the session on September 10th. Register here!

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