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SEC Examination Priorities for 2018

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February 8, 2018

Client Alert
The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) recently released its 2018 National Exam Program Examination Priorities. Highlights from the 2018 exam priorities include:

A more complete discussion of the exam priorities is included below. Firms should review their policies, procedures and business activities in light of OCIE’s 2018 priorities. A copy of the examination priorities publication is available here. Firms should also review the FINRA 2018 Regulatory and Examination Priorities Letter which is described in our Client Alert available here.

Retail Investor Protection

Protecting retail investors remains a priority for OCIE in 2018, and it will likely continue to be a focus for the foreseeable future. In this respect, OCIE has indicated that it will focus on the following areas, among others, in conducting its 2018 examinations:

Compliance and Risks in Critical Market Infrastructure

OCIE will continue to focus on examining entities providing services critical to the proper functioning of capital markets including:

FINRA and MSRB

OCIE will continue its oversight and examination of FINRA and the MSRB focusing on operations, regulatory programs, examination programs and internal policies, procedures and controls.

Cybersecurity

Cybersecurity continues to be an SEC priority. OCIE examinations will continue to focus on cybersecurity governance and risk assessment, access rights and controls, data loss prevention, vendor management, training and incident response. 

Anti-Money Laundering Programs

OCIE will continue to examine whether SEC regulated entities are establishing appropriate anti-money laundering programs including engaging in sufficient customer due diligence, understanding the nature and purpose of customer relationships in addressing risks, filing timely, complete and accurate Suspicious Activity Reports (“SARs”) and conducting independent tests of their anti-money laundering programs.

Conclusion

Firms should consider the SEC examination priorities along with the recently released FINRA 2018 Regulatory and Examination Priorities Letter as they conduct their annual reviews of policies, procedures and business activities. Investment advisers may also consider our recent Client Alert providing guidance on the annual regulatory and compliance review process available here. Where firms observe deficiencies in their own practices, adjustments should be made before they find themselves the subject of a FINRA or SEC investigation, examination or enforcement action.

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