The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) highlighted alternative data, or “alt data,” as a top examination priority.1 AIMA held a webinar on November 17, 2020, for investment managers on OCIE’s use of alt data, entitled Alternative Data and OCIE: How, What and Why You Should Prepare Ahead of Your Next SEC Exam, led by Senior Advisor of Promontory Financial Group Jane Jarcho, Director of Promontory Financial Group Sarah Curran, Director of Promontory Financial Group Drew Weilbacher, as well as AIMA’s Senior Advisor, Suzan Rose.
The first takeaway is to scrutinize your information sources to identify your use of alt data providers, in particular, and how that data fits into the firm’s policies and procedures in relation to material nonpublic information (“MNPI”) or personally identifiable information (“PII”). Here are some considerations:
The second takeaway is to implement, revise, and revisit your policies and procedures for handling data. Here are some considerations:
The third takeaway is that vendors can provide excellent data for your investment fund, but the problems associated with dealing with certain vendors may outweigh their value to your investment fund. Here are some considerations:
The fourth takeaway is that employees should be trained on handling data. Here are some considerations:
The fifth takeaway is that ongoing monitoring affects every aspect of compliance. Here are some considerations:
1 Note: “Alt data” refers to data not traditionally in investors’ data sources that investors use to gain insights into a company or investment. OCIE Exam 2020 Exam Priorities: https://www.sec.gov/news/press-release/2020-4