Exam Takeaways: SEC and DOL Joint Exams

WHAT HAPPENED?

Regulatory requirements and expectations for firms are constantly evolving; with that, examination practices are changing as well. An emerging approach to routine examinations includes exam teams from both the Securities and Exchange Commission and the Department of Labor collaborating on the examination.

This method has been used to evaluate advisory firms and who manage accounts subject to the Employee Retirement Income Security Act (ERISA), which is enforced by the DOL. Here are some observations made by registered investment advisers regarding ERISA compliance:

KEY TAKEAWAYS

  • A firm’s compliance manual must address basic ERISA policies and procedures for contracts, proxy voting, soft dollars, and any compensation for recommending certain investments
  • Contracts should include an ERISA provision, including fee calculation procedures, for all accounts
  • Disclosures and policies and procedures should address when a plan’s account is treated differently than other accounts (e.g. due to client restrictions, the type of advice given, trade allocations, etc.)
  • Some items on Form ADV disclosures may be affected, including those regarding fees, types of services, and types of clients
  • All necessary disclosures must be accurate and provided to clients
  • All ERISA accounts managed by the adviser should be made easy to classify and identify

WHAT DOES THIS MEAN FOR ME?

If accounts managed by your firm are subject to ERISA requirements, it is possible that a future routine examination may include examiners from both the DOL and SEC. Contact Fairview with questions about exam preparation or ERISA compliance concerns.

About the Author:

Fairview®
Founded in 2005 with the goal of developing streamlined solutions for investment advisers, Fairview® is now servicing investment advisers, foundations, and funds with nearly $300 billion in collective assets.