SEC Finds Outsourced CCO's Struggling to Identify Key Risks

Outsourcing the compliance function is not new, but the SEC's recent examination of outsourced CCO's smaller investment shops brought some concerning issues to light as reported in Buy-Side Technology. A note published by the SEC OCIE on November 9th raised alarm with their findings that outsourced CCO's could not state the risks associated with their investment management firm or stated risks that differed from those identified by the firm's principals. Whether these issues are unique to smaller firms is not clear, but highlights the need for clear risk policies as part of any compliance outsourcing agreement.