The staff of the SEC’s Office of Compliance Inspections and Examinations has released the 2017 Examination Priorities, which focus on retail investment products, retirement advice, FINRA supervision, and private funds. The staff’s retail initiatives will include a focus on robo-advisers (compliance programs, suitability, data protection); wrap programs (suitability, trading away), ETFs (exemptive relief compliance, creation/redemption processes), and newly-registered advisers. As part of its emphasis on retirement products, the SEC will scrutinize variable insurance and target date funds and assess how pension plan advisers satisfy their fiduciary obligations. The staff will continue to target private fund advisers and cybersecurity. As part of its obligation to assess market-wide risks, OCIE will enhance oversight of FINRA, including assessing the quality of broker-dealer exams. OCIE’s Director advised registrants to “evaluate their own compliance programs in these important areas and make necessary changes and enhancements.”
OUR TAKE: Many of these areas – wrap, ETFs, variable insurance, target date funds, cybersecurity – continue longstanding initiatives. Others – robos, private advisers, FINRA – are more recent regulatory objectives. Compliance officers should use this exam priorities letter as a tool to upgrade their own compliance programs.