Rather than taking a more hands off approach, the Securities and Exchange Commission will step into the boardroom to gauge an advisory firm’s culture of compliance, according to the director of the SEC Office of Compliance Examinations (OCIE) Carlo di Florio. Under this new approach, the board members of newly registered hedge funds and private equity funds could be sitting down with an SEC examiner sometime in the coming months.
According to the SEC, it plans to have direct discussions with a firm’s board about the regulatory issues board members and the senior management team are monitoring and what steps they are taking to address them. The SEC has stated that the goal of these targeted reviews is to help companies foster compliance. However, they may also be used to identify red flags and determine the focus of the examination.
In his remarks at Fordham Law School’s Corporate Compliance Conference on April 2 in New York, di Florio emphasized the importance of setting the tone at the top of the organization to foster a “culture of ethics.” Very little will be off-limits to examiners. “The SEC will expect to look at a firm’s budgets, hiring and firing,” said di Florio.
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