/OCIE Releases Risk-Based Examination Initiatives

OCIE Releases Risk-Based Examination Initiatives


On November 8th, 2018, the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE), released its series of examination initiatives focused on mutual funds and exchange traded funds (collectively, “Funds”).  The goal of these initiatives is to assess industry practices in areas that have a direct impact on retail investors.

OCIE will center its examinations on Funds and/or advisers that fall under one, or more, the following categories:

  • Index funds, specifically custom-built indexes;
  • Smaller ETFs (or ETFs with low secondary market trading);
  • Mutual funds with higher fund allocations to specified securitized assets;
  • Funds with “aberrational” underperformance, especially in relation to similar peer groups;
  • New advisers to managing mutual funds; and
  • Advisers providing advice to mutual funds and private funds with similar strategies or overlapping portfolio managers.

Examinations will continue to be modified to address applicable business practices, risks, and conflicts, but will generally be centered around:

  • Policies and procedures: to confirm they are reasonably designed to address risks and conflicts, including Funds’ boards and their oversight of the compliance program;
  • Disclosures: by funds to investors in their prospectuses, other filings and shareholder communication, and by advisers of the Fund’s board, to analyze risk and conflicts; and
  • Deliberative processes: related to risks and conflicts, incorporating disclosures, portfolio management compliance and fund governance.


For more information regarding the examination focus areas and risk assessments detailed in the OCIE Risk Alert, please reach out to Fairview® directly.

As always, Fairview® will be working with clients to ensure policies and procedures, disclosures and deliberative processes are in accordance with OCIE initiatives.

About the Author:

Founded in 2005 with the goal of developing streamlined back office solutions for investment advisers, Fairview® is now servicing investment advisers, foundations, and funds with over $196 billion in collective assets.