SEC 2017 Exam Priorities

January 26, 2017

On Jan. 12, 2017, the SEC's announced the Office of Compliance Inspections and Examinations’ (OCIE) 2017 priorities.  The last such announcement under Mary Jo White's tenure as SEC Chairperson, the focus continues some themes from prior years and focuses more energy on newer themes.

A key question or issue at this point is the impact of the new Trump adminstration's pronouncements regarding a hiring freeze and freeze on new regulations.  Nonetheless, advisers are well-advised to pay attention to the highlighted areas as they also represent key business and compliance risks.

As noted in the SEC's public statement the following are the key areas of focus:

"The 2017 examination priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers, national securities exchanges, and municipal advisors.  Areas of examination focus include:

"Retail Investors – Protecting retail investors remains a priority in 2017.  OCIE will continue several 2016 initiatives to assess risks to retail investors seeking information, advice, products, and services. It also will undertake examinations to review firms delivering investment advice through electronic mechanisms, sometimes referred to as “robo-advising,” as well as wrap fee programs in which investors are charged a single bundled fee for advisory and brokerage services.

"Senior Investors and Retirement Investments – OCIE also is continuing its focus on public pension advisers and expanding its focus on senior investors and individuals investing for retirement.  OCIE is broadening its ReTIRE initiative to include reviews of investment advisers and broker-dealers that offer variable insurance products to investors with retirement accounts as well as those advisers that offer and manage target-date funds.  OCIE also will focus more specifically on registrants’ interactions with senior investors, including with respect to identifying financial exploitation.

"Market-Wide Risks – To help fulfill the SEC’s mission of maintaining fair, orderly, and efficient markets, OCIE will continue its focus on registrants’ compliance with the SEC’s Regulation SCI and anti-money laundering rules.  New initiatives for 2017 include an evaluation of money market funds’ compliance with the SEC’s amended rules, which became effective in October 2016.

"FINRA – Consistent with OCIE’s goal of enhancing oversight of FINRA to protect investors and the integrity of our markets, it will continue conducting inspections of FINRA's operations and regulatory programs, and focus resources on assessing the examinations of individual broker-dealers.

"Cybersecurity – OCIE will continue its ongoing initiative to examine for cybersecurity compliance procedures and controls, including testing the implementation of those procedures and controls at broker-dealers and investment advisers."

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