On January 11, the SEC’s Office of Compliance Inspections and Examinations
(“OCIE”) announced its annual examination priorities for 2016.
The OCIE conducts examinations of regulated entities with the aim to promote
compliance, prevent fraud, identify risk and inform policy. The key points
of the OCIE’s priorities for 2016 are summarized below.
Continuation of ReTIRE Program
In 2015, OCIE focused its efforts on protecting retail investors and retirement
savers, something OCIE will continue to do in 2016. To this end, the SEC
will continue the multi-year ReTIRE program which focuses on SEC-registered
investment advisers and broker-dealers and the services they offer with
respect to their clients with retirement accounts. ReTIRE seeks to examine
what constitutes a reasonable basis for the recommendations made to investors,
conflicts of interest, compliance controls and marketing and disclosure
practices.
Fees and Expenses Disclosures
OCIE will also continue to focus on fees and expenses of private fund advisers.
OCIE will examine the sorts of disclosures advisers make to their clients
with respect to fees. In addition, they will also look at the controls
and practices in terms of the management of performance-based and asset
based fee accounts.
Private Placement Scrutiny
The OCIE plans to review private placements, which include offerings made
pursuant to Regulation D, with the goal of ensuring that the legal requirements
of due diligence, disclosure and suitability are being met.
Anti-Money Laundering, Cybersecurity and Liquidity
As part of its focus on market-wide risks, OCIE will continue to examine
firms’ Anti-Money Laundering Programs and whether or not they are
adequate with respect to the requirements imposed on broker-dealers. OCIE
will continue to conduct a similar examination with respect to cybersecurity
in general which will include testing firms’ implementation of procedures
and controls. On an issue that had a high profile in 2015, OCIE will also
be focusing on liquidity controls of advisers to mutual funds, ETFs and
private funds that have exposure to potentially illiquid securities.
The OCIE stated in their release that their current roster of examination
priorities is not intended to be exhaustive and more may develop throughout
the coming year.
For more information on the topic, contact
Wayne H. Davis at
davis@thsh.com.
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