SEC OCIE Provides Detail on LIBOR-Related Examinations

In a new risk alert, the SEC Office of Compliance Inspections and Examinations ("OCIE") provided details on regulatory examinations to assess registrants' preparation for the discontinuation of LIBOR. OCIE had previously identified LIBOR as an examination priority in its 2020 annual report.

The OCIE said that it will examine whether a firm has evaluated the impact on (i) business activities, (ii) operations, (iii) services, and (iv) customers, clients and/or investors. More specifically, OCIE indicated it will review firms' plans and/or steps taken, including:

• exposure to LIBOR contracts that extend past the anticipated discontinuation date (and whether fallbacks have been incorporated);
• operational readiness (e.g., systems, controls, processes and risk/valuation models);
• investor disclosures and reports;
• handling of conflicts of interests;
• clients' efforts to use an alternative reference rate in place of LIBOR; and
• the use (and names) of third-party advisors assisting with LIBOR transition.

Appendix A to the risk alert includes a "sample" list of documents that OCIE may use for requesting information from regulated firms.