ARTICLE
23 October 2024

SEC's Division Of Examinations Halloween Treat–2025 Priorities

KG
K&L Gates LLP

Contributor

At K&L Gates, we foster an inclusive and collaborative environment across our fully integrated global platform that enables us to diligently combine the knowledge and expertise of our lawyers and policy professionals to create teams that provide exceptional client solutions. With offices spanning across five continents, we represent leading global corporations in every major industry, capital markets participants, and ambitious middle-market and emerging growth companies. Our lawyers also serve public sector entities, educational institutions, philanthropic organizations, and individuals. We are leaders in legal issues related to industries critical to the economies of both the developed and developing worlds—including technology, manufacturing, financial services, health care, energy, and more.
In order to discourage investment advisers, broker-dealers and investment companies from engaging in any "tricks," the SEC's Division of Examinations has published a treat, in the form of its 2025 Examination Priorities...
United States Technology

In order to discourage investment advisers, broker-dealers and investment companies from engaging in any "tricks," the SEC's Division of Examinations has published a treat, in the form of its 2025 Examination Priorities (the Priorities). This publication, an annual event since 2013, provides market participants with insight into what the Division of Examinations will focus on in the coming fiscal year.

All told, the 2025 version of the Examination Priorities has not changed very much from 2024. For advisers, this means a continued focus on fiduciary duty, complex products, unconventional strategies, financial conflicts of interest, accuracy of fee calculations, and compliance program implementation. For broker-dealers, the examination staff will continue to focus on compliance with Regulation Best Interest, including account type recommendations and reasonably available alternatives, and trading practices. Operational resilience, cyber security and anti-money laundering matters remain focus areas for all market participants.

While much remains the same, there were some changes of note. The Priorities did include a specific reference to compliance with recently adopted SEC rules, including the new amendments to Form PF (effective March 2025) and the operational changes and recordkeeping requirements associated with the T+1 conversion.

The Priorities also highlight issues relating emerging financial technologies, including artificial intelligence (AI). Here, the Priorities note a focus on AI-related disclosures, the supervision of the use of AI, including an "in depth" review where AI is integrated into advisory operations such as portfolio management, marketing and compliance. The Priorities also emphasize the Division's continued focus on AI-washing and its intention to examine "in particular" firms that use digital engagement practices to provide advice or recommendations.

Given this Halloween treat, market participants should expect more of the same examinations from the SEC in 2025, with a focus on compliance with newly adopted rules, as well as continuing priorities reflected in certain rules (like the private fund adviser rules, safeguarding and predictive data analytics) that were either vacated or not adopted.

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More