June 7, 2023

Volume XIII, Number 158


June 07, 2023

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June 06, 2023

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SEC’s Office of Compliance Inspections and Examinations Releases 2019 Examination Priorities

On Dec. 20, 2018, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) issued its annual Examination Priorities for 2019 (Exam Priorities), which is available for download here. The Exam Priorities focus around six thematic areas: (1) Retail Investors, including seniors and those saving for retirement; (2) Registrants responsible for critical market infrastructure; (3) FINRA and MSRB; (4) Digital Assets; (5) Cybersecurity; and (6) Anti-Money Laundering (AML) Programs.

As in the past, OCIE notes that their priorities are not exhaustive. The scope of any examination is determined through a risk-based approach that includes analysis of the registrant’s operations and products offered. For example, OCIE typically examines the disclo­sure of services, fees, expenses, conflicts of interest for investment advisers, and trading and execution quality issues for broker-dealers. OCIE is continually evaluating changes in market conditions, industry practices, and investor preferences to assess risks to both investors and the markets.

In connection with OCIE’s priority to protect retail investors, OCIE reviews retail fees and expenses paid by investors, conflicts of interest of industry personnel, treatment of senior investors and the advertising and suitability of retirement products, portfolio management and trading, operations of and the selection of mutual funds and ETFs, procedures of municipal advisors, procedures for broker-dealers entrusted with customer assets, and microcap securities.

OCIE also continues to prioritize critical market registrants impacting the safety and operation of our financial markets, including clearing agencies, entities subject to Regulation SCI, transfer agents, and national securities exchanges.

Finally, OCIE will prioritize examinations of the effectiveness of FINRA and MSRB, which are assigned the responsibility for certain aspects of investor protection. OCIE also will conduct inspections to gather information and evaluate practices affecting digital assets, cybersecurity, and AML programs (especially broker-dealers subject to express obligations and SAR filing obligations).

Overall, OCIE noted that although changes to its priorities may be continual, OCIE’s analytic efforts and examinations remain firmly grounded in its four pillars: promoting compliance, preventing fraud, identifying and monitoring risk, and informing policy.

©2023 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume IX, Number 14

About this Author

Arthur Don, Greenberg Traurig Law Firm, Chicago, Corporate and Finance Law Attorney

Arthur Don is the Co-Chair of the Investment Regulation Group. He has more than 30 years of experience representing mutual funds, public investment companies, fund independent directors, investment advisers, private investment funds, private equity funds, real estate funds, broker-dealers and public companies in a variety of sophisticated securities transactions. His experience includes various aspects of investment company practice, from organizing new funds through acquisitions and mergers of funds. Arthur has represented issuers and underwriters in numerous public...

Vincent Lewis Securities Attorney

Vincent Lewis advises on transactional matters and regulatory issues arising under U.S. federal securities law. He represents SEC-registered investment companies, including mutual funds, closed-end funds, exchange-traded funds (ETFs), and independent board members as well as registered investment advisers. He also advises closed-end funds regarding initial public offerings, preferred share offerings, and private offerings. Vincent drafts prospectuses, offering memoranda, compliance procedures, proxies, and third-party service contracts pertaining to investment funds.