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Miss us? SEC will check in more
Newspaper reports investment advisors to get annual random checks rather than regular 5-year visits.
October 31, 2005: 7:16 AM EST

NEW YORK (CNN/Money) - Investment advisers could get more frequent visits from the Securities and Exchange Commission, according to a published report, as the agency starts random checks of firms, to be performed annually, rather than regular visits once every five years.

The Wall Street Journal reported Monday that John Walsh, chief counsel for the SEC's Office of Compliance Inspections and Examinations, said the new policy would let the SEC more actively monitor lower-risk advisory firms.

The SEC divides investment-advisory firms into "high risk" and "low risk" categories, according to the report, based on factors that include how a firm performed on previous examinations. Firms deemed higher risk will be subject to more frequent and targeted examinations, Walsh told the paper.

The agency also is considering assigning teams of examiners to monitor the largest firms, according to the report.

The paper reports that the program will also require less manpower, something that could become especially important as the SEC begins to register hedge funds, adding to its examination workload. But the paper said that the General Accounting Office issued a report in August that said it is possible under the new method that as many as one-third of firms wouldn't be selected for examination within a 10-year period. The GAO report said it wasn't clear "that this approach will have more of an effect in deterring abuses than if each fund was assured of being examined every five years or less."

For news about the SEC's probe of General Motors and pension accounting, click here.  Top of page

Securities and Exchange Commission (SEC)
Investment Advisors
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