SEC Exams During a Pandemic: The CCO Role When ......General Counsel/CCO, Millburn Ridgefield Corp. ($5.6B in AUM) in New York William Nelson CCO, Mercer Global Advisors ($15B in AUM)

Carl AyersPublisher

SEC Exams During a Pandemic: The CCO Role When Working Remotely

2Tuesday, September 15, 2020 www.regcompliancewatch.com

Chad EarnstCCO, PGIM ($1T in AUM)in Newark, N.J

Kyrstin RitsemaCCO, Executive Wealth Management ($924M in AUM) in Brighton, Mich.

Rob TullManaging DirectorProgressive Compliance Advisors in Tucson, Ariz.

Steven FelsenthalGeneral Counsel/CCO, Millburn Ridgefield Corp. ($5.6B in AUM) in New York

William NelsonCCO, Mercer Global Advisors ($15B in AUM) in Denver


Our Agenda

• How the Pandemic has Changed OCIE Exams

• The Special Challenges Facing CCOs Given Remote Exams

• How You Can Still Do a “Day One” Presentation—virtually

• A Rundown of the Hottest OCIE Exam Topics

• Examiners’ Focus On BCPs

• Tips For Your Peers When it Comes to Preparing for an OCIE Exam


What’s Hot


Driscoll Spoke Today at London Conference

• Remote since March

• Will Continue through December and “we’ll likely go further than that”

• Exams Down Slightly in 2020

• FY 2019: 3,100 Exams

• FY 2020: 2,900

• New OCIE Risk Alert Coming Today

• Cybersecurity Credentialing (Passwords): Fraudster Risks

• 9th Risk Alert in 2020: Most Ever by OCIE in One Year

• New SEC RIA Registrants in Europe

• GDPR Issue Remains

• Found a Solution for UK Firms

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Peter DriscollOCIE DirectorSEC Washington, D.C.

Tuesday, September 15, 2020 www.regcompliancewatch.com

The pandemic & OCIE exams

• Receiving the Request List

• Internal Notification and Taking Inventory

• Document Production & Review

• Electronic Storage and Production

• Virtual Walk-Throughs

• Opening Presentation

• Planning and Remote Engagement by Senior Leaders

• Presentation Materials

• Coordination

• Standing Calls – Internal and with Staff

• Explicit Communication of Roles / Responsibilities

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• The Pandemic has Not Slowed Down Regulatory Inquiries

• No Grace Period for Pandemics

• Anticipate the Exam Staff’s Anxiety about Your Businesses and Your Responses

• Structuring Exam Responses for the Staff’s Benefit

• Answer Just the Question Presented by the Staff

• Have Two People on Calls with the Examination Staff

• Helps to Confirm Conversations

• Helps to Build More Robust Dialogue with the Staff

• Be Aware that the Exam Staff’s Approval of a Practice is Not Binding on the SEC

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Chad EarnstCCO, PGIM ($1.4T in AUM)in Newark, N.J



No One Knows Your Business Better Than You Do!

• Determine What Type of Auditor You are Working With

• Make Your Pre-exam Presentation CONCISE

• Give a High-Level Overview

• Take No More Than 15 Minutes

• Build on the Pre-exam Presentation the First Day

• More Detailed; Repeat, and Then Build

• Preemptively Answer Questions You ANTICIPATE Them Asking

• What Did You Pick Up On In the Pre-exam Call?

• What Have You Seen Come Up on Resources or Networks?

• Provide Exceptional Organization in Your Responses

• Provide Responses How You Anticipate They Would Like to See Them

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• Keep It Simple

• Literal, Precise, Brief

• An OCIE Interview is Still an OCIE Interview, Regardless of Whether Video or In-Person

• Sustain and Promote Your Approachability

• Prepare Your Team!

• Be Open and “Read” Your Auditors

• Ask Questions

• What is it that You are Attempting to Determine from this Line of Requests?

• Answer Auditor Requests Expediently

• Prepare Your Team!

• The Faster You Get Requests to Auditors, the Faster You are Done

Defend What You Believe Is Right!

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• Companies Should Track Pandemic-related Decision-making

• Companies Should Be Prepared to Provide Information Related to the Continuity of Business Operations and the Ability of a Firm to Work Remotely for Extended Periods

• Companies Should Ensure that their Cybersecurity Policies Guarantee Proper Oversight of Remote Employees and that the Policies are Tested

• The SEC Will Be Understanding with Respect to Timing of Responses to Document Requests, But Know There are Limits to their Patience

• Coordination is Important, So Good Communication (Intra-group, Intra-company) is Critical

• Companies Should Ensure All Staff Who Will Interact with the SEC are Trained On All Electronic Systems, Including Videoconferencing and Document Submission Software

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• Approach to an Exam

• No Different, Except

• Create Rapport

• Communicate with Employees

• Expectations

• Preparation

• Availability

• Dedicated Workspace

• Distractions

• More Important to Explain Up Front

• Prepare a PowerPoint Overview

• Address Issues Important to You

• Address Issues Raised by Staff

• Head Off Misconceptions

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• Examiners May Be More Understanding, But

• Don’t Test It

• Extreme Responsiveness

• Focus Your Employees and Keep Them Alert

• OCIE Has an Increased Focus On:

• Business Continuity/Disaster Recover

• Collection of Data and Analysis

• Increased Risks in the COVID Era

• Cyber Risks - Bad Actors are Trying to Exploit

• MNPI

• Pay Attention to the Aug 12, 2020 OCIE Risk Alert:

• Protection of Investors’ Assets - Did You Modify Your Procedures to Accommodate Remote Working? Don’t Compromise on Identifying Investors and Authenticating Instructions

• Supervision of Personnel - Make Sure You are Supervising and Make Sure They Know It

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• OCIE Has an Increased focus on:

• Practices Relating to Fees, Expenses and Financial Transactions - Firms May Be Tempted to Make Up For Lost Revenue

• Investment Fraud - Properly Investigate Investment Opportunities - Tempting To Invest in Vaccines & Cures

• Business Continuity - We Just Had The Ultimate Test - Reevaluate and Adjust Your P&Ps

• Protection of Investor and Other Sensitive Information - Increased Platforms Mean Increased Risk (Computers, Tablets & Mobile Devices). Reevaluate

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Chad EarnstCCO, PGIM ($1T in AUM)in Newark, N.J






Carl AyersPublisher


Documents

SEC Exams During a Pandemic: The CCO Role When ......General Counsel/CCO, Millburn Ridgefield Corp. ($5.6B in AUM) in New York William Nelson CCO, Mercer Global Advisors ($15B in AUM)