New Rules, Proposed Rules, Guidance and Alerts –

SEC STAFF GUIDANCE AND ALERTS –

OCIE Announces Risk-Based Sweep Exam of Funds, ETFs and Advisers -

On November 8, 2018, the SEC’s Office of Compliance Inspections and Examinations (OCIE) published a risk alert announcing a series of risk-based examination initiatives focused on mutual funds, ETFs and advisers to assess industry practices and regulatory compliance in specific areas that the staff believes may have an impact on retail investors. The Risk Alert states that the sweep exam will focus on funds and/or advisers that fall into one or more of the following categories:

• Index funds that track custom-built or bespoke indexes. OCIE will seek to assess the risks and challenges associated with an index provider constructing and maintaining an index for a single fund or sponsor that may allow for a more complex or targeted investment strategy than traditional index funds. OCIE will seek to understand the roles of the adviser and index provider in selecting and weighting index components and ongoing index administration and will assess whether any conflicts of interest are appropriately addressed. OCIE will also review portfolio management practices for consistency with fund disclosures and will assess the adequacy of disclosures to the fund board about the services provided by index providers…