8 January 2020: The Securities and Exchange Commission’s (SEC) Office of Compliance Inspections and Examinations (OCIE) has published its examination priorities for 2020.
Many of the 2020 priorities are continuations of work that OCIE carried out in 2019. Retail investors will remain a priority, with OCIE committing to the protection of such investors through examinations that will focus on the disclosure of fees, expenses and conflicts of interests. Information security and Anti-Money Laundering programs will, perhaps unsurprisingly, remain at the top of OCIE’s list, with a particular focus on whether firms are adequately adapting their AML programs to meet their regulatory obligations.
It is interesting to note, however, that OCIE have refreshed their focus on investment advisers. In particular, it sets out that its examinations of registered investment advisers (RIAs) will look at those that have never been examined, including new RIAs and those that have been registered for several years but have so far not been examined. These examinations will extend to private funds as well as RIAs advising retail investors.
The 2020 examination priorities highlight FinTech and innovation as a key field and recognise that “advances in financial technologies, methods of capital formation and market structures, as well as registered firms’ use of new sources of data […] warrant ongoing attention and review.” OCIE will also examine SEC-registered firms that are working in the field of digital assets, as well as those firms that provide so-called ‘robo-advice’.
With regard to market infrastructure, OCIE will be keeping its finger on the pulse over the next year, looking at the security and resilience of the systems within clearing agencies, national securities exchanges, alternative trading systems and transfer agents in particular. OCIE has also committed to its continued oversight of the Financial Industry Regulatory Authority (FINRA) and will look specifically at FINRA’s operations, regulatory programs and the quality of FINRA’s own examinations of broker dealers and municipal advisors.
Commenting on the priorities, SEC Chair Jay Clayton said “OCIE’s 2020 examination priorities identify key areas of risk, both existing and emerging, that we expect self-regulatory organizations (SROs), clearing firms, investment advisers and other market participants to identify and mitigate. I applaud OCIE’s thoughtful, strategic and efficient focus, which is critical to the fulfilment of the SEC’s mission and our service to Main Street investors”. The list of priorities, OCIE points out, is not exhaustive and will extend into other areas of focus, including risk alerts and industry outreach.