Expectations loom huge in SEC’s 2024 exam priorities

When the SEC recently issued its 2024 Examination Priorities document (“Exam Priorities”) there were some interesting changes that stood out from years past. For starters, this is easily the earliest the SEC has released its annual Exam Priorities in many years, which have traditionally been made public late in the calendar year or early the following year. Last time it was issued in February 2023 and then prior to that it was issued even later in March 2022. As the SEC’s leadership team explains, the current one’s publication date aligns with the start of the SEC’s fiscal year. It does make perfect sense, so an immediate question would be, why did it take so long to make that decision? The explanation from the SEC is a renewed dedication to greater transparency and engagement with the industry. But the underlying message is more likely, “We’re willing to inform you sooner plus provide you more on what we’re doing and more on what we expect, so be sure to get on the compliance bandwagon.” It’s a recurring theme we’ve been seeing over the past couple years. If you go back to the SEC”s unusual Risk Alert in September, it actually tells you what the SEC reviews to determine its exam strategy – and why you will be examined! See our ComplianceAlert, “SEC Reveals its Examination Strategy.”

A top priority area for this year’s version is rule requirements for investment advisers to private funds. So much so that there is a dedicated section that spells out certain exam focus areas for these firms. The SEC states it will be prioritizing private funds’ market risks, adherence to limited partnership agreements, fees and expenses, and valuations, among other items. (And let’s not forget that also in 2024 there will be the first compliance date for the slew of new rules for private fund managers.) Again, the SEC is showing it’s committed to the plan of, “If I tell you what’s important, I’ll expect you to be in compliance when examined.”

The appearance in this year’s Exam Priorities is one of an open and communicative SEC, but reading between the lines, the regulator’s stance is clear. This is not kind and friendlier or a meet-and-greet offering, but instead a means to aggressively do its job of pursuing deficiencies and enforcement actions. And it’s woven within the details of the Exam Priorities for all investment advisers to see – and to heed its warning.

Watch our ComplianceAlert Video, “SEC’s New Private Fund Rules Alter Landscape”

View our FrontLine Edge Platform that ensures full compliance for private fund managers

View the SEC’s Division of Examinations “2024 Examination Priorities”