SEC Examiners will be busy in 2016

This week the Office of Compliance Inspections and Examinations (OCIE) issued its Examination Priorities for 2016 (the annual memo is typically released each January). The memo is stunning in its similarity to the 2015 memo. It contains many of the same themes such as a strong retirement account/investor focus, branch office exams, fees and expenses, and cybersecurity.

As to what’s new… Exchange-Traded Funds (ETFs) will be on the hot seat this year from both a sales-side and issuer perspective. The SEC is interested in portfolio concentration issues, risk disclosures, and exam teams will be looking at just how leveraged these funds get.

Additional NEW focus areas are:

  • Variable Annuities – thought to be forgotten…but sales practice issues once again are in the forefront, most likely due to their use in retirement portfolios, which the SEC tends to deem a “belts and suspenders” approach
  • Public Pension Advisers – pay-to-play rule violations will be the focus here
  • Regulation Systems Compliance and Integrity (SCI) – new rule/new focus; the firms that fall under the new SCI definition should expect a visit in 2016
  • Liquidity Controls – it seems “liquidity” is the new 2016 buzz-word – and the SEC will focus on just how much exists in the fixed income markets
  • Private Placements – both public and private offerings will be evaluated for their risk disclosures and sales suitability
  • Hedge Funds – exam teams will circle back to these private fund types again (PE was the focus in 2015) to see how they handle fees, expenses, and conflicts of interest from side-by-side management

OCIE will be busy in 2016 and continue its new approach of relying on its data resources to make registrant selections for exams. Will your name be in the 2016 hat?

View the OCIE Examination Priorities for 2016 memo