Yesterday the Securities and Exchange Commission's ("SEC") Office of Compliance Inspections and Examinations ("OCIE") released their Exam Priorities for 2018. Understanding OCIE's Exam Priorities is more important than ever, because SEC Examinations of regulated entities increased by 20% from 2015 to 2016. And the SEC's Budget Estimates for 2017-18 have sought to increase Examinations to 13% of all registered investment advisers, up from 10-11% in prior years. The OCIE's 2018 priorities are targeted toward improving compliance, preventing fraud, monitoring risk and informing policy.
For 2018, OCIE's examination priorities are broken down into five categories: (1) compliance and risks in critical market infrastructure; (2) matters of importance to retail investors, including seniors and those saving for retirement; (3) FINRA and MSRB; (4) cybersecurity; and (5) anti-money laundering programs. Under each category, a number of key exam areas include:
Protecting Retail Investors:
Disclosure of the costs of investing
Electronic investment advice
Wrap fee program
Never-before examined investment advisers
Senior investors and retirement accounts and products
Mutual funds and exchange traded funds
Municipal advisers and underwriters
Fixed income order execution
Cryptocurrency, initial coin offerings, secondary market trading, and blockchain
Compliance and Risks in Critical Market Infrastructure:
Clearing agencies
National securities exchanges
Transfer agents
Regulation systems compliance and integrity entities
Focus on FINRA and MSRB:
FINRA
MSRB
Cybersecurity
Anti-Money Laundering Programs
The published priorities for 2018 are not exhaustive and additional priorities may be added in light of market conditions or as OCIE identifies emerging risks and trends.
