Kelley A. Howes
The SEC’s Office of Compliance Inspections and Examinations (OCIE) published its 2019 examination priorities on December 20, 2018. Although OCIE’s published priorities “provide a preview of key areas where OCIE intends to focus its limited resources,” registrants should be aware that OCIE will proactively seek insight into evolving markets “including changes in risks to markets and investors,” and that its examination program will continue to be refined based on its evaluation of such risks. Registered investment advisers, registered funds, and broker-dealers should carefully review OCIE’s examination priorities to ensure that their related compliance policies and procedures are well-established, monitored, and enforced.
Six Themes and Related Focus Areas
OCIE’s examination priorities address six “themes” related to “practices, products, and services that [OCIE] believes present potentially heightened risk to investors or the integrity of the U.S. capital markets.” Each theme is discussed below.
Registered investment advisers, broker-dealers, registered funds, and other market participants should carefully evaluate their existing policies and procedures in light of OCIE’s identified 2019 examination priorities. However, OCIE is clear that these priorities are not exhaustive and registrants should not become myopic.
“[T]he scope of any examination is determined through a risk-based approach that includes analysis of the registrant’s operations, products offered, and other factors. This risk-based approach often results in examinations that address key aspects of the SEC’s regulatory oversight, such as the disclosure of services, fees, expenses, conflicts of interest for investment advisers, and trading and execution quality issues for broker-dealers.” Registrants are reminded that OCIE’s efforts “remain firmly grounded in its four pillars: promoting compliance, preventing fraud, identifying risk, and informing policy” and they should conduct their annual review of their compliance policies and procedures from a similar broad and risk-based vantage point.
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