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The SEC Division of Examinations (the "Division") identified common compliance risks observed in examinations of mutual funds and exchange-traded funds.
In a Risk Alert, the Division highlighted deficiencies relating to:
- policies and procedures involving portfolio management, valuation, trading, conflicts of interest, fees and expenses, and advertising;
- fund boards' oversight of fund compliance programs; and
- disclosures in filings and advertising and sales literature.
The Division also highlighted best practices to assist funds in designing and implementing compliance programs, including:
- reviewing policies and procedures for consistency with practices;
- conducting periodic testing for compliance with disclosures;
- ensuring oversight of key vendors;
- assessing whether information provided to the fund's board is accurate and whether board reporting processes are being adhered to; and
- reviewing disclosures in fund filings and investor communications for accuracy, as well as consistency with investment policies and restrictions.
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