The SEC Office of Compliance Inspections and Examinations ("OCIE") announced 2018 examination priorities based on issues currently presenting increased risks to retail investors and the integrity of the U.S. capital markets. The OCIE examinations will focus primarily on five key areas: (i) matters of importance to retail investors (including seniors), (ii) the operational soundness of entities providing critical market infrastructure, (iii) the oversight programs of FINRA and the MSRB, (iv) cybersecurity, and (v) anti-money laundering ("AML").
Specifically, the OCIE outlined the following priorities for regulatory focus:
- Retail Investors. Protection of retail investors, especially those most vulnerable (seniors), focusing on the disclosure of the costs of investing, electronic investment advice (including "robo-advisors"), wrap-fee programs, retirement accounts, fixed-income order execution, cryptocurrencies and initial coin offerings ("ICOs").
- Risks in Critical Market Infrastructures. Operational risks of entities such as clearing agencies, national securities exchanges and transfer agents.
- FINRA and MSRB. Examination of FINRA's operations and regulatory programs, including the effectiveness of FINRA's examinations of broker-dealers. Examination of MSRB's oversight of operational and internal policies, procedures and controls.
- Cybersecurity. Encouraging firms to identify and manage cybersecurity risks. Examinations will focus on governance and risk assessment, access rights and controls, data loss prevention, vendor management, training and incident response.
- Anti-Money Laundering. Examination of entities' AML programs, including due diligence requirements, customer risk assessment and related regulatory obligations.
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