SEC targeting the top in broker, advisory firm reviews

Regulators looking at head count for clues to compliance

By Dan Jamieson

Oct 11, 2012 @ 3:39 pm (Updated 4:52 pm) EST

SEC, regulation, broker, advisory, compliance

The Securities and Exchange Commission is taking a hard look at senior management at brokerage and advisory firms to gauge “the tone at the top,” said Carlo di Florio, director of the SEC's Office of Compliance Inspections and Examinations.

At the same time, examiners and enforcement personnel have teamed up to bring more targeted enforcement actions, he said.

The SEC wants to know “that enough resources have been allocated to compliance functions,” Mr. di Florio said Thursday at a compliance conference in San Diego sponsored by National Regulatory Services.

“We have meetings with boards and senior management and put that on the table,” he said. “We've begun to monitor head count and want to understand why [attrition among risk managers] is happening. Head counts are key indicators. If we see them go down while business is heating up in certain ways, that means a firm is cutting in the wrong way.”

Separately, members of the SEC's exam and enforcement staffs are working side by side to identify problems and bring cases. “The way we used to do exams is [to] write them up, then throw it over the fence to enforcement,” Mr. di Florio said. “It was two distinct processes.”

Now enforcement and exam personnel are “locking arms” in developing cases, he said.

The SEC's asset management unit is the first division to use the new team approach. “This is one of the great stories at the SEC,” Mr. di Florio said.

“This is a fairly new development,” said John Walsh, a partner a Sutherland Asbill & Brennan LLP, and a former official in the OCIE.

“The creation of the asset management unit is a fundamental change in the way the SEC functions,” Mr. Walsh said at the conference. The SEC has a “fairly substantial team of attorneys that focuses on [asset management] issues. … It really does make a difference if people on the enforcement side understand the space, and understand the regulatory regime.”