The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued an alert entitled “Strengthening Practices for Preventing and Detecting Unauthorized Trading and Similar Activities,” intended to help investment advisers assess compliance and supervisory controls to detect and deter unauthorized trading. The alert notes that changes in trading patterns, a high volume of trade cancellations or corrections, manual trade adjustments, or unexplained profits for a particular trader or client may warrant additional scrutiny. The alert suggests compliance measures investment advisers may want to consider, including stress testing and independent trading reviews. The alert is the second this year and the fourth in a continuing series of Risk Alerts that the SEC’s examination staff expects to issue.
See http://www.sec.gov/about/offices/ocie/riskalert-unauthorizedtrading.pdf to access the alert.