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Vedder Thinking | Articles OCIE Issues Risk Alert Relating to Investment Adviser Oversight of Supervised Persons with Disciplinary Histories


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On July 23, 2019, the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a risk alert outlining its observations and recommendations following an examination initiative that focused on oversight practices at registered investment advisers that employ supervised persons with disciplinary histories. Although the initiative focused on practices relating to the oversight of employees with disciplinary histories, the risk alert also identified more general supervision deficiencies observed by the OCIE staff. The observations fell into the following three main categories:

  • Supervised Persons with Disciplinary Histories. OCIE observed that many advisers failed to provide full and fair disclosure to clients of disciplinary events involving the adviser or its employees and that many advisers did not adopt compliance programs that adequately addressed the risks of employing individuals with disciplinary histories.
  • Compliance and Supervision. OCIE observed that many advisers did not adequately supervise or establish standards of conduct for supervised persons, including in particular with respect to supervised persons who work remotely, prepare their own advertising or otherwise exercise autonomy. OCIE additionally noted that many advisers had adopted supervision policies and procedures that were at odds with their actual practices and disclosures.
  • Conflict-of-Interest Disclosures. OCIE observed many advisers with undisclosed compensation arrangements that resulted in conflicts of interest that could have affected the impartiality of advice given to clients.

The risk alert included recommendations for improving the compliance deficiencies observed by the OCIE staff, such as adopting and implementing tailored policies and procedures that address issues relating to hiring supervised persons with disciplinary histories, enhancing due diligence practices with respect to hiring practices and heightened supervision for employees with disciplinary histories or those who work remotely.

The OCIE risk alert is available here.


Nathaniel Segal


Jacob C. Tiedt


John S. Marten