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Day: January 8, 2020

SEC Examinations to Focus on Compliance, Reg BI, and Retail

 

The SEC’s Office of Compliance Inspections and Examinations (OCIE) will focus on compliance programs, retail investors, and Regulation Best Interest according to its 2020 Examination Priorities Letter.  OCIE will investigate whether the CCOs are knowledgeable and empowered and whether they are actively engaged in firm operations.  OCIE will prioritize reviewing dually registered firms, advisers that use sub-advisers, and ESG advisers.  OCIE will also spend significant resources ensuring that firms follow Regulation Best Interest, deliver the new Form CRS, and observe the new Advisers Act fiduciary interpretations.  OCIE will scrutinize disclosures, fees, conflicts, and suitability related to recommendations of funds, ETFs, and other products to retail investors.  Other topics in the Letter include information security, robo-advisers, digital assets, and series trusts operated by third-party administrators.  OCIE warns that the priorities listed “are not exhaustive and will not be the only issued OCIE addresses in its examinations.”

The year is only a week old, but don’t blame compli-pros if they’re already exhausted.  Even before the year started, compliance professionals faced a mountain of new work because of Regulation BI and Form CRS.  Next comes a massive 28-page priorities letter with dozens of new “ToDos.”  We recommend that senior management seriously consider a budget increase for the compliance team.