This is what makes the SEC examiners pull their hair out, so much so that they want the commissioners to get the enforcement division involved.

Drew Bowden, director of the Securities and Exchange Commission's national examination program (in the Office of Compliance Inspections and Examinations), spoke this morning at the Investment Company Institute's (ICI's) 2015 Mutual Funds and Investment Management Conference at the JW Marriott Desert Springs in Palm Desert, California. On a panel called "OCIE and Enforcement: A Discussion of Roles and Responsibilities, Priorities, and Coming Attractions," Bowden gave an in-depth answer to an audience question about the examination process.

The panel, moderated by Michael Downer of Capital Group, also included Andrew Ceresney (director of the SEC's division of enforcement) and Randall Lee (partner at Wilmer Cutler Pickering Hale and Dorr and an SEC alumnus).

Bowden complained about fundsters and others who, during SEC examinations, try to keep their chief compliance officers as the sole point of contact, even when examiners' questions involve subjects outside the CCO's expertise. And he warned that examiners want more data from fundsters.

Yet the top complaint of his examiners, Bowden said, involves "unreasonable delays in production of documents or data" or "unreasonable assertions of attorney-client privilege." He lamented the frequent situation when a firm being investigated repeatedly stalls on handing over information, or repeatedly and broadly asserts privilege, only to reverse and hand over the data when the examiners bring in the enforcement division, data that ends up showing that nothing's wrong.

"We just burned eight months," Bowden said.

Bowden said he's asking the SEC's five commissioners to have the enforcement division bring "enforcement cases against people who unreasonably delay or unreasonably assert attorney-client privilege," even if they turn over the data or documents eventually and it turns out there was no proverbial fire generating that smoke.

Lee pointed out that, the more data the SEC asks fundsters for, the longer it takes fundsters to turn it over. He expressed concern that examiners "tend either to really not fully appreciate" or are not very sympathetic to fundsters on this issue.

Bowden did reassure attending fundsters that, when he talks to his examiners in the field, they say that "the majority of time people are responsive, professional, cooperative, and candid."

"Whether or not something irritates us is beside the point," Bowden added. 

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