A newly released risk alert from the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) details some of the main compliance issues facing firms during the COVID-19 pandemic, including supervising employees remotely and ensuring business continuity in the midst of a constantly changing situation.
The OCIE has been reaching out to SEC registrants to better understand the impact the virus’s spread was having on their ability to fulfill compliance mandates.
“Through these and other efforts, as well as consultation and coordination with our SEC colleagues and other regulators, OCIE has identified a number of COVID-19 related issues, risks and practices relevant to SEC-registered investment advisers and broker-dealers,” the risk alert said. “Additionally, market volatility related to COVID-19 may have heightened the risks of misconduct in various areas that the staff believe merit additional attention.”
In addition to supervising personnel and business continuity, the OCIE asked firms to focus on protecting investors’ assets; ensure practices relating to fees, expenses and financial transactions were in order; avoid investment fraud; and keep a close eye on protecting sensitive investor information.
The risk alert is the commission’s latest attempt to protect vulnerable investors from financial misconduct related to the pandemic. The SEC has already released several FAQs and additional information on how investors can protect themselves from such schemes, and in some instances the commission has charged businesses with making misleading COVID-19 claims to customers.
FINRA also responded to the situation by setting up its own task force to protect investors from fraud. The task force has operated remotely since late March and is headed by Greg Ruppert, FINRA’s executive vice president for the National Cause and Financial Crimes Detection Programs.
“No crisis is ever wasted by a fraudster,” Ruppert said. “Fraudsters are using the pandemic as an opportunity, so FINRA’s role in identifying fraud, acting quickly to protect investors, ensuring fair markets and providing timely information to investors, member firms, other regulators and law enforcement is essential.”
