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Law360 (August 13, 2020, 6:29 PM EDT ) The compliance and exam unit of the U.S. Securities and Exchange Commission has issued an alert recommending that registered firms reassess policies for monitoring and hiring staff as they cope with market volatility and technological challenges brought by COVID-19.
Despite the hardships caused by the pandemic, firms are still obligated to supervise personnel, including their "investment and trading activities," and maintain rigorous screening of new hires, the Office of Compliance Inspections and Examinations said in Wednesday's alert.
"OCIE encourages firms to closely review and, where appropriate, modify their supervisory and compliance policies and procedures," the watchdog said, pointing to market volatility and telework as the main roots of the concerns.
The alert notes that firms may need to update their practices to address staffers communicating or executing transactions off-site or on personal devices, or making investment recommendations tied to sectors experiencing high volatility or fraud.
Supervisors may have less oversight and interaction with staff in a remote environment, and maintaining effective due diligence and background checks when hiring may also be difficult, which could require procedural updates, OCIE said.
OCIE urged firms to continue protecting investors' assets and accurately disclosing fee and expense practices.
"Firms have obligations relating to considering and informing investors about the costs of services and investment products, and the related compensation received by the firms," according to the alert, which asked firms to monitor potential conflicts of interest and fee errors while making sure recommendations are made in the "best interest of investors."
The alert also included a brief warning regarding potential fraud.
"Times of crisis or uncertainty can create a heightened risk of investment fraud through fraudulent offerings," it said.
"Firms should be cognizant of these risks when conducting due diligence on investments and in determining that the investments are in the best interest of investors. Firms and investors who suspect fraud should contact the SEC and report the potential fraud."
--Editing by Adam LoBelia.
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