On February 7, 2018, the Office of Compliance Inspections and Examinations (OCIE) issued its much awaited 2018 National Exam Program Examination Priorities. What was issued this year reads more like a business plan or mission statement for the SEC rather than a letter to the industry, as has been the style in years past. However, like previous releases it covers the SEC’s new exam focus too.
The first three pages describe OCIE and its goals and leadership more in the manner of a sales brochure, which is a unique twist on the typical boiler-plate style letter we have seen in the past. OCIE is making it known that it’s an integral part of the SEC and its mission is clear.
As for the SEC’s exam objectives for the remainder of 2018, highlights are:
Registrant Exams:
- Fees – all firm types will be reviewed for their effectiveness and accuracy of fee disclosures
- Senior Investors – OCIE will focus on firms that view seniors as a target market or specialize in retirement advice
- Funds – both mutual funds and ETFs with low performance or liquidity in relation to peers should expect a visit as well as advisers new to the fund management industry
- Cryptocurrency – ICOs are on the radar as well as any other cryptocurrency product that can be viewed as a security
- Cybersecurity – remains on the list and is clearly still important
- AML – both funds and broker-dealers should expect their exams to have a focus here to ensure that suspicious activity is being identified and monitored properly
Industry Exams:
OCIE has taken the unusual step of using its annual priorities to address its goals with monitoring other types of industry players and SROs. In 2018, OCIE plans to visit:
- Clearing Agencies
- National Securities Exchanges
- Transfer Agents
- Systems Compliance Integrity (SCI) Entities
- FINRA
- MSRB
The SEC has oversight responsibility for all SROs and routinely conducts examinations of the SROs to ensure they are fulfilling their regulatory responsibilities. These exams are often complex and can lead to significant changes in how the SROs operate.
To date, OCIE has already stepped up the number of exams it conducts annually by utilizing a more risk-based approach to data gathering and conducting exams over the phone or with significantly shortened on-site days thereby shortening the overall exam cycle.
Firms should take the necessary steps now to review their compliance program and prepare for an exam. Once an exam starts, it’s too late.
View the SEC’s OCIE “2018 National Exam Program Examination Priorities”
