The Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (“SEC”) has identified its 2016 examination priorities organized around the same theme as last year. That is:
- Retail Investors/Investors Saving for Retirement: Examining matters of importance to retail investors, including investors saving for retirement-which will include a review of exchange-traded funds (ETFs) and ETF trading practices, variable annuity recommendations and disclosure, and potential conflicts and risks involving advisers to public pension funds.
- Issues Related to Market-Wide Risks: A continuation of its focus on cybersecurity controls at broker-dealers and investment advisers. New initiatives for 2016 include an evaluation of broker-dealers’ and investment advisers’ liquidity risk management practices, and firms’ compliance with the SEC’s Regulation SCI, designed to strengthen the technology infrastructure of the U.S. securities markets.
- Data Analytics – OCIE’s enhanced ability to analyze large amounts of data will assist examiners’ ongoing initiatives to assess anti-money laundering compliance, detect microcap fraud, and review for excessive trading. Data analytics also will help examinations focused on promotion of new, complex, and high-risk products.
Other Initiatives of review:
ØMunicipal Advisors-newly registered, assessing their compliance with SEC/Municipal Securities Rulemaking Board rules
ØPrivate Placements-evaluating that their legal requirements are being met in the areas of due diligence, disclosure and suitability
ØNever Before Examined Investment Advisors/Investment Companies-a continuation of examining those federally registered RIA firms that have never been examined
ØPrivate Fund Advisers-focusing on fees and expenses and evaluating the controls/disclosure associated with side-by-side management of performance based and asset-based fee accounts
ØTransfer Agents-reviewing for timely turnaround of items and transfers, recordkeeping and retention, safeguarding assets
The 2016 exam initiatives are somewhat of a continuation of last year’s priorities and should be read carefully. I have also included both the 2015 and the 2014 exam priorities too as a good reminder for all!
