SEC’s Office of Compliance Inspections and Examinations Releases its 2016 Examination Priorities

On January 11, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced its annual examination priorities for 2016. The OCIE conducts examinations of regulated entities with the aim to promote compliance, prevent fraud, identify risk and inform policy. The key points of the OCIE’s priorities for 2016 are summarized below.

Continuation of ReTIRE Program

In 2015, OCIE focused its efforts on protecting retail investors and retirement savers, something OCIE will continue to do in 2016. To this end, the SEC will continue the multi-year ReTIRE program which focuses on SEC-registered investment advisers and broker-dealers and the services they offer with respect to their clients with retirement accounts. ReTIRE seeks to examine what constitutes a reasonable basis for the recommendations made to investors, conflicts of interest, compliance controls and marketing and disclosure practices.

Fees and Expenses Disclosures

OCIE will also continue to focus on fees and expenses of private fund advisers. OCIE will examine the sorts of disclosures advisers make to their clients with respect to fees. In addition, they will also look at the controls and practices in terms of the management of performance-based and asset based fee accounts.

Private Placement Scrutiny

The OCIE plans to review private placements, which include offerings made pursuant to Regulation D, with the goal of ensuring that the legal requirements of due diligence, disclosure and suitability are being met.

Anti-Money Laundering, Cybersecurity and Liquidity

As part of its focus on market-wide risks, OCIE will continue to examine firms’ Anti-Money Laundering Programs and whether or not they are adequate with respect to the requirements imposed on broker-dealers. OCIE will continue to conduct a similar examination with respect to cybersecurity in general which will include testing firms’ implementation of procedures and controls. On an issue that had a high profile in 2015, OCIE will also be focusing on liquidity controls of advisers to mutual funds, ETFs and private funds that have exposure to potentially illiquid securities.

The OCIE stated in their release that their current roster of examination priorities is not intended to be exhaustive and more may develop throughout the coming year.

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01.14.2016  |  PUBLICATION: BulletPoint  |  TOPICS: Cybersecurity and Data Privacy, Investment Management, Securities

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