2018 SEC Examination Priorities

On Wednesday, February 7, 2018, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) released its 2018 examination priorities. The protection of retail investors, including seniors and those saving for retirement, remain a priority. In fact, examinations will focus on products and services offered to retail investors, as well as the disclosures they receive about those investments.

OCIE has organized the 2018 priorities around five areas, which reflect certain practices, products, and services they believe present potential heightened risk to investors and/or the integrity of the U.S. capital markets. These five areas include:

1. Matters of importance to retail investors, including seniors and those saving for retirement;

2. Compliance and risks in critical market infrastructure;

3. Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board;

4. Cybersecurity; and

5. Anti-Money Laundering programs.

Aside from protecting retail investors, particularly seniors and those saving for retirement, examinations will also focus on higher risk products as well as recent technological changes in how investment advice is delivered. The areas of focus include:

• Disclosure of the Costs of Investing;

• Electronic Investment Advice;

• Wrap Fee Programs;

• Never-Before-Examined Investment Advisers;

• Senior Investors and Retirement Accounts and Products;

• Mutual Funds and Exchange Traded Funds;

• Fixed Income Order Execution; and

• Cryptocurrency, Initial Coin Offerings, Secondary Market Trading, and Blockchain.

Cybersecurity and Anti-Money Laundering programs continue to remain examination priorities. With cyber threats increasing, examinations will continue to focus on governance and risk assessment, access rights and controls, data loss prevention, vendor management, and training and incident response. With regards to Anti-Money Laundering, reviews will focus on customer due diligence and if entities are taking reasonable steps to understand the nature and purpose of customer relationships and to properly address risks.

Throughout the year OCIE may release further priorities, as they continue to identify risks and trends and respond to tips, complaints and referrals.

If you should have any questions, please do not hesitate to contact us.