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The SEC Office of Compliance Inspections and Examinations ("OCIE") highlighted examination priorities for 2020. The highlighted priorities represent the SEC's focus on areas of increased risk to both retail investors and the integrity of the U.S. capital markets.
According to the report, the OCIE will focus on:
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protection for retail investors (e.g., seniors and individuals saving for retirement, and teachers and military personnel) by monitoring those advisers and broker-dealers serving retail investors, and those products that may be especially appealing to retail investors, including public funds and microcap securities;
- market infrastructure and, in particular, the resiliency and security of market participants;
- information security and cybersecurity;
- FinTech issues, including the sale of digital assets and the provision of electronic investment advice;
- as to investment advisers, the implementation of their compliance programs;
- as to broker-dealers, (i) compliance with the net capital and custody rules, (ii) trading practices, and (iii) risk management practices;
- as to municipal advisors, (i) compliance with firm and individual registration, and with continuing education requirements, (ii) fulfillment of fiduciary duty and fair dealing requirements, and (iii) disclosure of conflicts of interest;
- for all firms subject to the Bank Secrecy Act, their AML programs;
- for clearing agencies, risk management;
- for exchanges, (i) the handling of market disruption events and (ii) their monitoring of improper activity in their marketplaces; and
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further oversight of FINRA and the MSRB.
Commentary
Anyone involved in the development and maintenance of a compliance and supervisory program should review the entire report for the guidance it provides on OCIE's examination focus.
The report provides some interesting statistics on the growth of the investment adviser industry. The number of broker-dealers continues to decline. The number of advisers continues to rise. There is good reason to believe that that trend will continue and, with the implementation of Regulation Best Interest and more burdensome state laws, accelerate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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