Two Trading Compliance Challenges: Valuation and Trade Errors

Trade errors are inevitable. What distinguishes compliant firms is that they detect and identify them quickly, resolve them fairly and expeditiously, and minimize the likelihood of errors in the first place. The SEC will focus on trade errors and their resolution during its examinations of investment advisers. The Investment Advisers Act is silent on how to handle trade errors and is equally silent on the issue of who should bear the responsibility for losses resulting from such errors. In fact, the SEC staff has provided limited guidance on the issue. A review of enforcement proceedings, however, does shed light on the SEC’s position with respect to the correction of trade errors. This session will provide insight and guidance on what SEC examiners will expect to see and articulate best practices for addressing trade errors that are consistent with fiduciary standards.

Recent market events offer valuable lessons regarding the need for effective policies and controls addressing the timely and accurate valuation of securities and other investments. This session will emphasize the “best practices” that the SEC staff has identified during examinations and highlight those areas where enforcement actions have been brought.