SEC Issues Risk Alert on Mutual Fund and ETF Compliance Deficiencies

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.