Coast to coast
compliance
The Division of Examinations has released its 2024 Exam Priorities. The SEC Press Release states, “The Division prioritizes examinations of certain practices, products, and services that it believes present potentially heightened risks to investors or the integrity of the U.S. capital markets… The published priorities are not exhaustive of the focus areas of the Division in its examinations, risk alerts, and outreach. The scope of any examination includes analysis of an entity’s history, operations, services, products offered, and other risk factors.”
- Examinations of Investment Advisers: The Division remains focused on advisers’ compliance programs, including whether their policies and procedures reflect the various aspects of the advisers’ business, compensation structure, services, client base, and operations, and address applicable current market risks.
- Examinations of Investment Advisers to Private Funds: The Division will prioritize identifying present portfolio management risks, adherence to contractual requirements, accurate calculation of fees and expenses, consistency with policies, procedures and disclosures, and compliance with the Advisers Act- specifically accurate Form ADV reporting and timely completion and distribution of private fund audits by qualified auditors.
- Regulation Best Interest: In reviewing whether broker-dealer recommendations are in customers’ best interest, areas of particular interest will include: (1) recommendations with regard to products, investment strategies, and account types; (2) disclosures made to investors regarding conflicts of interest; (3) conflict mitigation practices; (4) processes for reviewing reasonably available alternatives; and (5) factors considered in light of the investor’s investment profile, including investment goals and account characteristics.
- Form CRS: The Division will review the contents of the Form CRS, whether they have filed with the Commission, and if they delivered their relationship summary to retail customers.
- Broker-Dealer Financial Responsibility Rules: Examinations will focus on broker-dealer compliance with the Net Capital Rule and the Customer Protection Rule and related internal processes, procedures, and controls.
- Broker-Dealer Trading Practices: Examinations will cover broker-dealer equity and fixed income trading practices. These include compliance with Regulation SHO, Regulation ATS, and the Exchange Act Rule 15c2-11.
The highlights for examination priorities in key risk areas include information security, operational resiliency, and cybersecurity for broker-dealers and investment advisers. Additionally, the examination priorities emphasize the monitoring of crypto assets, emerging financial technology, and the effectiveness of anti-money laundering programs.
While this blog post highlights some of the SEC’s focus areas, it is not limited to all that can be review reviewed. For the Division of Examinations complete priorities list, please refer to the 2024 Examination Priorities pdf.
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