SEC OCIE Highlights 2019 Examination Priorities

The SEC Office of Compliance Inspections and Examinations ("OCIE") highlighted exam priorities for 2019. The priorities focus on areas that represent increased risks to retail investors and the integrity of the U.S. capital markets.

The OCIE will focus on five key areas: (i) issues of significance to retail investors (including seniors), (ii) compliance and risk as to registrants responsible for market infrastructure, (iii) digital assets, (iv) cybersecurity, and (v) anti-money laundering ("AML").

  • Retail Investors. Examinations will concentrate on: (i) disclosures of costs of investing, (ii) broker-dealer conflicts of interest, (iii) broker-dealer oversight of interactions with senior investors, (iv) investment adviser portfolio recommendations, (v) risk-based examinations of certain investment advisers, (vi) risks affiliated with mutual funds and exchange-traded funds, (vii) municipal advisor conflicts of interest, (viii) broker-dealers' custody risks, and (ix) sales of stocks with a market capitalization of under $250 million.

  • Compliance and Risk in Registrants Responsible for Market Infrastructure. The OCIE will focus on Regulation Systems Compliance and Integrity (Reg. SCI). The OCIE will evaluate transfers, recordkeeping and the protection of funds and securities. In addition, the OCIE will examine internal audit and surveillance programs, as well as funding for regulatory programs.

  • Digital Assets. The OCIE will review the "offer and sale, trading, and management of digital assets." In cases in which the assets are securities, the OCIE will examine for additional regulatory compliance.

  • Cybersecurity. The OCIE will examine cybersecurity practices at investment advisers with multiple branch offices. The OCIE will continue to examine governance and risk assessment and access rights and controls.

  • AML Programs. The OCIE will review for compliance with AML obligations - specifically - the filing of suspicious activity reports.

The OCIE also stated that it would continue to monitor the regulatory oversight programs conducted by FINRA and the MSRB.

the OCIE noted that the OCIE itself has been required to adjust to changes in the SEC's registrant base, particularly the 5% increase in the number of registered investment advisers and decrease in the overall number of registered broker-dealers (with approximately 10% of all broker-dealers dually-registered as investment advisers).

Premium Content

Available only to Premium subscribers.

 

Tags