SEC Highlights Compliance Priorities at Outreach Program for Investment Advisors and Officers

The SEC Office of Compliance Inspections and Examinations ("OCIE") outlined OCIE priorities for the year at the 2016 Compliance Outreach Program for Investment Advisers and Investment Companies Senior Officers.

The SEC OCIE 2016 priorities include:

• Protecting retail investors and investors saving for retirement. The OCIE will examine: (i) SEC-registered investment advisers and broker-dealers, and the services they offer to investors with retirement accounts, (ii) exchange-traded funds, (iii) the supervision of branch offices, (iv) fee selection and reverse churning, (v) variable annuities, and (vi) public pension advisers.

• Assessing market-wide risks. The OCIE will examine: (i) cybersecurity compliance, controls and testing, (ii) the resiliency of Regulation Systems Compliance and Integrity entities, (iii) liquidity controls, and (iv) clearing agencies that are designated as systemically important.

• Using data analytics to identify signals of potential illegal activity. The OCIE will examine: (i) recidivist representatives and compliance oversight by their employers, (ii) the anti-money laundering programs of introducing broker-dealers, (iii) microcap fraud in the operations of broker-dealers and transfer agents, (iv) excessive or otherwise potentially inappropriate trading, and (v) potential suitability issues and breaches of fiduciary obligations via product promotion.

In addition, the OCIE expects to allocate examination resources to other priorities that include (i) municipal advisors, (ii) private placements, (iii) never-before-examined investment advisers and investment companies, (iv) private fund advisers, and (v) transfer agents.

Chair White urged senior officers of investment companies to promote strong compliance cultures at their respective organizations at every level by (i) implementing and enforcing a comprehensive set of compliance policies, procedures and systems with which to supervise their employees, and (ii) disclosing conflicts of interest fully and fairly.