CCO Resource Hub: Miscellaneous Resources

Chief Compliance Officer Committee

Miscellaneous Resources

In addition to the resources provided elsewhere in this Resource Center, the following resources may also be relevant to CCOs. Though these resources may not directly speak to the role of a CCO to a mutual fund or investment adviser, they do contain information that may assist such CCOs in the performance of their responsibilities.

Artificial Intelligence

This resource consists of a white paper, Creating An AI Governance Program, which was published by Contoural in 2024. The founder of Contoural, Mark Diamond, has done work with ICI in the past on regulatory issues and we have found him to be a valuable and impartial resource.

Charles River Model Errors Presentation (Kristofer Swanson, May 2019)

Cybersecurity Resources

In response to members' interest in understanding what cybersecurity-related information CCOs report to their boards, one member shared with me two documents that identify "potential" reporting areas. One document may apply to annual board reporting and the other to interim board reporting:

Delaware Supreme Court Case Holding Directors Liable for Compliance Risk (July 2019)

This resource consists of five samples of certifications that members of the CCO Committee use to have employees certify that they are in compliance with the firm’s policies relating to electronic communications. Many members include language concerning compliance with the e-communication policies in their other compliance certification(s) that employees are asked to sign periodically. The samples in this resource are for those firms that want to have a separate certification for the e-communication policies.

This resource consists of an ICI memo and a link to a case in which the Delaware Supreme Court shed light on the responsibility directors have for overseeing compliance risk. Thought the case involved an ice cream manufacturer and not an asset management firm, the holding may be of interest to funds and their boards.

Establishing, Communicating, and Implementing Cultural Values, FINRA (February 2016)

Description: Discusses eight pieces of information FINRA will seek from broker-dealers to assess the broker-dealers’ culture of compliance and how they instill such culture throughout their organization. May be of interest to CCOs in considering their firm’s culture of compliance.

http://www.finra.org/industry/establishing-communicating-and-implementing-cultural-values

FINRA’s Report on Selected Cybersecurity Practices—2018

The report discusses FINRA’s observations “regarding effective practices that firms have implemented to address selected cybersecurity risks while recognizing that there is no one-size-fits-all approach to cybersecurity.”

The Report, which contains FINRA’s observations regarding how broker-dealers are addressing cybersecurity concerns, is divided into five sections:

  • Branch controls;
  • Phishing;
  • Insider threats;
  • Penetration testing; and
  • Mobile devices.

http://www.finra.org/sites/default/files/Cybersecurity_Report_2018.pdf

Fund-of-Fund Resources

A. Non-ETF Fund-of-Funds

In October 2020, the SEC adopted Rule 12d1-4 under the Investment Company Act. The rule permits registered investment companies (“acquiring funds”) to acquire the securities of any other registered investment company or BDC (referred to as “acquired funds”) in excess of the limits in Section 12(d)(1) of the Act. The Rule was intended to create a consistent framework for fund-of-funds arrangements by replacing the SEC’ previous approach, which was handled through the SEC’s exemptive order process and varied based on an acquiring fund’s type, with a rule governing these arrangements. Open-end funds, unit investment trusts, closed-end funds (including BDCs), exchange-traded funds, and exchange-traded managed funds can rely on the new Rule as both acquiring and acquired funds.

Importantly, the Rule includes various conditions.  One of these will require funds that do not share the same investment adviser to enter into a fund-of-funds investment agreement memorializing the terms of the arrangement. Another requires certain evaluations and findings be made before the acquiring fund invests in an acquired fund. These differ depending upon whether a fund is the acquiring or acquired fund and whether it is a management company, unit investment trust, or a separate account funding variable insurance contracts. To assist funds in implementing the requirements of Rule 12d1-4, the ICI worked with SIFMA and Ropes & Gray to develop sample agreements that can be used between acquiring funds and acquired funds. These two sample forms of Fund of Funds Investment Agreements are available through the links below. One version of the form contains footnotes while the other version contains endnotes—they are otherwise identical. The forms are intentionally simple and streamlined and include just a handful of basic terms. The footnotes/endnotes are included to highlight certain issues for fund firms seeking to customize a form Agreement for Rule 12d1-4, and are not intended to be included as part of the Agreement.

For example, some parties may wish to consider adding additional detail, such as “generic” contract terms (e.g., choice of law, indemnification) and/or customized terms specific to this Agreement (e.g., more granular undertakings to comply with the Rule’s requirements, consent to electronic delivery provisions, notification if an acquiring fund exceeds (or falls below) the thresholds necessitating reliance on the Rule, acknowledgement that it is the acquiring fund’s responsibility to select the appropriate share class of the acquired fund for its investment and other needs).

B. ETF Fund-of-Funds

Because ETFs may present unique issues under Rule 12d1-4, the Institute worked with outside counsel (Bibb Strench, Partner, Thompson Hine) to develop a form Fund-of-Funds agreement for ETFs to use in implementing the Rule.  This ETF Fund-of-Funds form agreement, which was vetted by ICI’s ETF members, is available through the following link:

Funds as Plaintiffs

These materials were produced for a panel at ICI’s March 2015 Mutual Funds and Investment Management Conference that discussed funds’ participation in class action litigation. The materials consisted of the following:

LIBOR Resources

In light of the fast-approaching cessation of LIBOR, which is expected by the end of 2021, it is crucial that firms (1) determine where LIBOR is referenced in their existing contracts and policies and procedures, including in any investment policies, and (2) ensure that they have alternative benchmark rates in place by the time LIBOR is discontinued. This section of the Resource Center consists of resources relating to the cessation of LIBOR and issues firms need to consider as they think about transitioning from LIBOR to new benchmark rates.

Non-1940 Act Investment Restrictions

This 2005 resource contains information about laws, other than the Investment Company Act of 1940, that may limit investments by registered investment companies, for example, in certain regulated industries. Because this resource was created in 2005 and has not been updated since, it should not be relied on by members as providing current information but, instead, as a starting point for members interested in researching non-1940 Act investment restrictions.

Recordkeeping Requirements

This 2018 resource discusses the recordkeeping requirements under Federal securities laws that would be applicable to a mutual fund complex. It includes a discussion of the recordkeeping requirements applicable to the fund, its adviser, and broker-dealers.

Risk Resources

In the Spring of 2019, the Office of the Comptroller of the Currency (OCC) published its Semiannual Risk Perspective. While the contents of this document are more relevant to federally regulated banking institutions, it has insights related to risk associated with changes to the financial markets and financial innovation. It also contains a discussion of the risks to institutions as a result of evolution of the industry, cyber threats, and reliance on third parties. Some of this information may be of interest to compliance officers. This resource consists of the following:

Transfer Agent Resources

ICI’s Transfer Agent Advisory Committee is dedicated to the interest of our members’ transfer agents. The Committee regularly publishes information that may be of use to the transfer agent community or to funds in overseeing their transfer agents. This information includes the following:

  • ICI Transfer Agent/Fund Disclosure Document Matrix (July 2019). This document details the various types of disclosure documents that transfer agents produce or distribute to comply with regulatory requirements. The information is in the form of a chart that lists the required disclosure and, for each such disclosure, its frequency, acceptable delivery methods, regulatory cite, and any comments.
    ICI Transfer Agent/Fund Disclosure Document Matrix (July 2019) (pdf)
  • ICI Fraud Incident Tracking Matrix (August 2019). This document is produced by a working group of ICI’s Transfer Agent Advisory Committee to capture information regarding the types of frauds our members’ transfer agents are experiencing on an ongoing basis. This document includes summary information on: the types of fraudulent activity transfer agents are seeing; account types impacted by the fraud; age of affected owners; types of transactions; fraudsters’ success rates; types of perpetrators; effectiveness of authentication controls; and new defenses deployed by transfer agents. It also has information on fraudulent checks received by members. ICI plans to update this information on a quarterly basis so our members can be apprised of current fraud trends impacting transfer agents.
    ICI Fraud Incident Tracking Matrix (August 2019) (pdf)

The documentation provided by ICI that may be accessed by committee and task force members is restricted to members use only and not for distribution or reproduction. Documentation may be used internally at member organizations as needed to facilitate committee and task force initiatives.