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U.S. Securities and Exchange Commission

Speech by SEC Staff:
Welcome and Closing Remarks Before the CCOutreach National Seminar


Lori A. Richards

Director, Office of Compliance Inspections and Examinations
U.S. Securities and Exchange Commission

SEC Headquarters
Washington, D.C.
November 14, 2007

As a matter of policy the SEC disclaims responsibility for any private statement by any employee. The speaker's views are her own, and do not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.

Good Morning, and welcome to the Securities and Exchange Commission. On behalf of the SEC and its staff, my colleague Buddy Donohue and I are so pleased to welcome you to the SEC's third annual CCOutreach National Seminar for investment adviser and investment company chief compliance officers. Welcome too to Washington DC, as I know that most of you have traveled from out of town to be here today.

I'm thrilled that we have a full house here in the Auditorium today, and also that so many CCOs and their staff are also participating in this program via live webcast. Indeed, hundreds more CCOs and their staff were interested in attending than we have seats here today — so I'm pleased that, for the first time, we can offer a live video webcast option to CCOs and their staff who could not be here with us today.

The turnout today is heartening — as it shows how very committed CCOs are to staying abreast of compliance developments and enhancing their ability to perform their critical compliance oversight functions. I want to say that I have enormous respect for what you do every day — because you help to make sure that the protections that are provided to investors in the texts of the securities laws and rules exist "off the page" too — you help to translate these protections from our rules and regulations into the real world in your firms' compliance programs. I commend you for what you every day to help to make these protections real.

And to me, today's turnout and the lasting interest in the CCOutreach program are positive signs of your commitment as CCOs to continuing to develop and enhance the compliance programs you administer. And it's a continuing job isn't it? We all know that a CCOs job is never really "done" — I'm not talking about the difficulty you have in putting your hat on and going home at 5pm, or the difficulty that you have in putting aside the compliance worries that keep you up at night — these are things that just "come with the job" of CCO. I'm speaking here in a broader sense — your job is never really "done" because the compliance programs you administer are never really "done" — they must continue to identify new risk areas, to develop means to address those new compliance risk areas, to address new products and new lines of business, to continue to identify new compliance tests, to implement new technologies, and of course, to be able to implement new regulations and new firm policies. That there are so many of you here today gives me great confidence in the willingness of CCOs to continue to be activist as CCOs, and to continue to grow and enhance your compliance programs.

I wanted to begin this morning with a bit of background on this program: the CCOutreach program was formed by the SEC's staff of the Division of Investment Management and the Office of Compliance Inspections and Examinations following implementation of the new "Compliance Rule" for advisers and funds, at a time when so many CCOs were working to establish new compliance programs or to improve existing compliance programs within their firms. It was born out of a desire to promote open communications between securities regulators and chief compliance officers with respect to compliance issues. It's designed to provide a forum to discuss compliance issues in a practical way, to share experiences, and for participants to learn about effective compliance practices. It really grew out of a need to create a forum within which SEC staff and CCOs could discuss the operational aspects of compliance, and to focus less on the discrete legal requirements — and more on the practical "how to's" of compliance. Ultimately, it's our hope that we can strengthen industry compliance for the protection of investors.

In addition to today's National Seminar, the CCOutreach program features other elements — let me give you the highlights of these. An important aspect of the program are regional seminars — held in locations across the country, these regional events are designed to be informal, and to allow SEC staff and CCOs to discuss emerging compliance issues and the challenges CCOs face in a small-group atmosphere. Over the course of the summer, the SEC staff in our regional offices held 27 seminars across the country! We also reached out to SEC-registered advisers located outside of the United States — and we held our first foreign CCOutreach seminar for European-based SEC-registered advisers in Luxembourg in July.

All told, more than 2,500 CCOs attended our regional seminars in 2007. I'm pleased that 99% of those attending said that the information provided in these seminars was "excellent" or "good." But even more importantly, I think, 99% said that the information they obtained at a regional seminar was useful in assisting them in their compliance efforts.

In addition to CCOutreach seminars, we also believe that CCOs can benefit enormously from knowing about the compliance issues that we're seeing in our examinations of other firms. We've heard many times from CCOs that — if they were aware of the issues that SEC examiners were seeing in our examinations, they would dig deep on those issues within their own firms and make sure that similar compliance problems don't exist in their organizations. Enabling this kind of proactive approach is exactly the reason why, in June of this year, we published our first "ComplianceAlert" summarizing the results of many of our recent examinations and exam sweeps. Given the positive response we've heard, we'll continue to publish these "ComplianceAlerts" on our website, probably twice a year.

One of the underlying principles of CCOutreach is that it will try to meet the needs of CCOs. We solicit feedback and input from CCOs in a variety of ways — most importantly for your purposes, we will ask you to complete a comment card at the end of today's program. We really value this input, and we use it to help us to tailor CCOutreach events and to ensure that we're covering the topic areas that you are most interested in.

One thing we've heard from CCOs is that you would value more niche-type programs — programs that are tailored to the nature of specific types of advisory firms. So, with this input clearly in mind, I'm pleased to announce today that we are planning to hold "Focused Seminars" on particular topics as part of the CCOutreach program. These seminars will be held at a regional office of the SEC, and broadcast to the meeting rooms of other SEC regional offices across the country, so that CCOs in the local community can attend. Many CCOs told us that they would value a program dedicated to compliance practices of smaller advisory firms. This isn't surprising, given that more than half of all SEC-registrants have five or fewer employees. In light of this, the first of these "Focused Seminars" will be dedicated to the particular issues faced by CCOs of smaller advisory firms. Watch our website for details on this Seminar. And, we welcome your suggestions for additional "Focused Seminars."

I'm also pleased to announce today that, in response to interest by CCOs of advisers located outside the U.S., we will be further expanding the global aspect of CCOutreach. We will hold two new regional seminars for SEC-registered investment advisers located abroad in December — in Hong Kong on December 4, and in Mumbai, India on December 6.

In addition, to hearing from CCOs of smaller advisers, and CCOs of foreign advisers, we also heard from CCOs of a number of newly-registered advisers. These CCOs told us that they would value some plainer-speaking language when it comes to their obligations under the Advisers Act. As you may know, almost 3,000 firms became registered with the SEC as investment advisers in just the last two years. To help these newly-registered advisers become knowledgeable of their new compliance obligations, we prepared a "plain English" summary of the key provisions of the Advisers Act, along with a list of the resources available from the SEC for new firms. We posted this information on our website, and we also e-mailed it to all newly-registered firms. While it was meant for new firms, I think it's a pretty good resource for all advisers. It's available at under the "Helpful Resources" section of the CCOutreach website at www.sec.gov/info/ccoutreach.htm.

We are pleased that the success of the CCOutreach Program for mutual fund and investment adviser CCOs has spawned a similar program for CCOs at broker-dealer firms. That program, which will be jointly sponsored with FINRA, will also feature a National Seminar in March of next year and will largely follow the format of this program. We are excited to open up a similar dialogue with broker-dealer CCOs, and we have you to thank for providing a successful model for us to follow.

Of course, the pinnacle of our CCOutreach program is the National Seminar, and we hope that today's National Seminar provides you with information that you can use in your compliance efforts. The topics for today's seminar were largely derived from the issues that CCOs told us they were most interested in hearing about — so these are the topics on today's agenda.

One thing we've heard very clearly from CCOs is that you want more information about "forensic" testing. We hope to help answer that need with the handout that we've provided in your materials today — and it will be available on our website as well under www.sec.gov/info/ccoutreach.htm. This handout answers the basic question — what the heck IS "forensic testing" anyway? And, it also summarizes some of the forensic tests that can be used in the key compliance control areas. SEC examiners use many of these tests to detect possible violations, and they can just as easily be used by CCOs as part of their compliance controls. While none of these forensic tests are mandated, we're providing this information with the hope that you will find it useful as you consider forensic tests that might enable you to better oversee your firm's compliance activities.

And, finally, because CCOs have told us that they value the opportunity to network with their peers, I hope that you will do so during the program, at breaks, and during lunch. I hope that you find today's National Seminar and the interaction with SEC staff and other CCOs to be valuable and that you will take away useful information that you can use.

As "Compliance Officer" for this event, I am required to provide the standard disclaimer. I am providing it for my remarks and for all other SEC staff who are speaking today — as a matter of policy the SEC disclaims responsibility for any private statement by any employee. The views that I and other SEC staff express at this event are our own, and do not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.

And now, I'd like to introduce my colleague, the Director of the Division of Investment Management, Buddy Donohue, who will provide an overview of the topics on today's agenda, and their significance in the context of compliance challenges in our markets and specifically to asset management firms today.

* * *

As we end today's CCOutreach National Seminar, I hope you heard some "takeaways" that will help you in your own compliance programs. I heard some terrific ideas from the CCOs who participated in today's panels: particularly helpful I think was hearing from CCOs of both large and small firms — while they may go about things differently and bring different resources to bear — they both told us of the ways that they make their compliance programs work. Some ideas that I heard and jotted down included: issuing a compliance newsletter; attending as many business meetings as possible; conducting a risk assessment with matrices and "heat maps," and then using it to inform resource allocations and focus; issuing a "mission statement" for the compliance program that describes its mandate, perhaps disseminated by senior management; getting involved in discussions about new products early; networking with other CCOs to learn how they deal with issues and obstacles; documenting the testing performed throughout the year to use in quarterly or annual compliance reports; the increasing requests from clients and prospective clients to meet with CCOs and to understand the firm's compliance program as an indicator of the value of compliance to the business; using the exam document request to shore up the importance of compliance with business leaders; bringing in felons as guest speakers; ensuring that new employees are brought into the firm's culture early; not being seen as the "Department of No;" establishing good relationships and credibility with business leaders and helping the firm get to where it wants to go within the rules; the use of employee certifications; the use of other firm functions in "synergy" with compliance, e.g., internal audit and risk management; and, perhaps most memorable for me — preparing for an exam is like kids preparing for a hockey game — if you put the time into practicing, the game is easy.

I want to thank all of the speakers at today's event — the very able SEC staff, and the CCOs in particular who have generously provided their time, expertise and insights today. We are grateful to them. If you have an interest in being a panelist at a future CCOutreach National Seminar — please let us know by email at CCOutreach@sec.gov, or let us know on a comment card — along with your name, the name of your firm, and how we can reach you.

I'd like to specifically acknowledge the very hard work by the SEC staff members who organized this National Seminar and indeed many of the other CCOutreach events — their efforts are noteworthy due to the value of this Seminar and the other CCOutreach events — but are all the more laudable because they are, after all, professional regulators and not professional conference organizers!! Thank you to: Jennifer McHugh, Karen Rossotto, Mavis Kelly, Shane Breffit, Christy Edson, Lelia Holder, Debbie Abernethy, and Donna Hawkins.

Thank you for attending, and for all you do as CCOs every day.


Modified: 11/16/2007