On January 7, 2020, the Office of Compliance Inspections and Examinations ("OCIE") of the U.S. Securities and Exchange Commission ("SEC") announced its examination priorities for fiscal year 2020.1 OCIE's 2020 examination priorities include:
- The protection of retail investors, particularly seniors and those saving for retirement, through the review of disclosures relating to fees, expenses and conflicts of interest;
- The review of system security and resiliency of entities that provide services critical to the functioning of capital markets (e.g., clearing agencies' timely corrective action in response to prior examinations);
- The review of cyber and other information security risks across the entire examination program;
- The risk-based examinations of registered investment advisers ("RIAs"), investment companies, broker-dealers and municipal advisors;
- Compliance with applicable anti-money laundering requirements;
- The review of advancing financial technology ("Fintech") and innovation, including digital assets, electronic investment advice and the use of new sources of data ("alternative data"), digital currencies and RIAs that provide services to their clients through automated investment tools and platforms ("robo-advisers"); and
- The evaluation of the effectiveness of the programs, policies and procedures of the Financial Industry Regulatory Authority, Inc. ("FINRA") and the Municipal Securities Rulemaking Board.2
OCIE will focus on private placements, securities of issuers in new and emerging risk areas and higher risk products, particularly including those that (i) are complex or non-transparent, (ii) have high fees and expenses or (iii) where an issuer is affiliated with or related to the registered firm making the recommendation. Before the June 30, 2020 implementation deadline for Regulation Best Interest, OCIE also intends to examine broker-dealers' and RIAs' progress in implementing the Regulation Best Interest requirements, including conflicts disclosure policies and procedures and Form CRS content and delivery.
OCIE is also keen on examining how firms use data sets from FinTech and innovation, including digital assets, electronic investment advice and alternative data, in interacting with, and providing services to, investors, firms and other service providers.
Originally published in REVERSEinquiries: Volume 3, Issue
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1. A copy of OCIE's 2020 examination priorities is available at http://bit.ly/2sNrm54.
2. See OCIE Announces 2020 Examination Priorities, available at http://bit.ly/2RO1zU2.
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