SEC Examination Priorities for 2020

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January 16, 2020

Client Alert
The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) has released its 2020 Examination Priorities. Focus themes for the 2020 exam priorities include:

OCIE indicated that its examinations and analysis will continue to remain grounded in four main pillars:

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 2020 priorities. A copy of the examination priorities publication is available here.

Retail Investor Protection

Protecting retail investors, and in particular seniors and those saving for retirement, remains a priority for OCIE in 2020. It is expected to continue to be a focus for the foreseeable future. OCIE has indicated that it will focus on the following areas, among others, in conducting its 2020 examinations:

Information Security

OCIE will continue to prioritize information security in its examination programs with a focus on:

OCIE will also continue to examine registrants for compliance with Regulations S-P and S-ID, focus on online access controls and examine safeguards around proper disposal of retired hardware.

During its investment adviser exams it will also focus on:

Financial Technology and Innovation

OCIE exams of financial technology and innovation will focus on firms’ use of alternative data sets and technologies to interact with and provide services to investors, firms and other service providers. In particular, OCIE will examine:

Anti-Money Laundering Programs

OCIE will continue to examine whether SEC regulated entities are establishing appropriate anti-money laundering programs including establishing appropriate customer identification programs, meeting Suspicious Activity Reports (“SARs”) filing obligations, conducting due diligence on customers, complying with beneficial ownership requirements and conducting robust and timely independent testing of anti-money laundering programs.

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.

Selected Areas for Examinations of Registered Investment Advisers

OCIE typically assesses compliance programs of registered investment advisers in one or more core areas including:

In addition, OCIE’s 2020 examination priorities of investment advisers include:

Selected Areas for Examinations of Investment Companies

OCIE will prioritize examinations of mutual funds and ETFs, the activities of their registered investment advisers and oversight practices of their boards of directors. Examinations will assess industry practices and compliance in a variety of areas with a focus on:

Selected Areas for Examinations of Broker-Dealers

In addition to the focus on sales practices, OCIE broker-dealer examinations will focus on:

Conclusion

Firms should consider the SEC examination priorities as they conduct their annual reviews of policies, procedures and business activities. Where firms observe deficiencies in their own practices, adjustments should be made before they find themselves the subject of an SEC investigation, examination or enforcement action.

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