The Securities and Exchange Commission has announced its Office of Compliance Inspections and Examinations’ (OCIE) 2017 priorities. New areas of focus include electronic investment advice, money market funds, and financial exploitation of senior investors. The priorities also reflect a continuing focus on protecting retail investors, including individuals investing for their retirement, and assessing market-wide risks.
“These priorities make clear we are continuing to focus on a wide range of issues impacting our markets, from traditional areas such as market-wide risks to new forms of technology including automated investment advice,” SEC Chair Mary Jo White said in a statement. “Whether it is protecting our most vulnerable senior investors or those investing in the trillion dollar money market fund industry, OCIE continues its efficient and effective risk-based approach to ensure compliance with our nation’s securities laws.”
The priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers, national securities exchanges, and municipal advisors.
Areas of examination focus include:
OCIE will continue several 2016 initiatives to assess risks to retail investors seeking information, advice, products, and services. It also will undertake examinations to review firms delivering investment advice through electronic mechanisms, sometimes referred to as “robo-advising,” as well as wrap fee programs in which investors are charged a single bundled fee for advisory and brokerage services.
Senior investors and retirement investments
OCIE is continuing its focus on public pension advisers and expanding its focus on senior investors and individuals investing for retirement.
OCIE is broadening its ReTIRE initiative to include reviews of investment advisers and broker-dealers that offer variable insurance products to investors with retirement accounts as well as those advisers that offer and manage target-date funds. Exams will also focus more specifically on registrants’ interactions with senior investors, including with respect to identifying financial exploitation.
OCIE will continue its focus on registrants’ compliance with the SEC’s Regulation SCI and anti-money laundering rules. New initiatives for 2017 include an evaluation of money market funds’ compliance with the SEC’s amended rules, which became effective in October 2016.
Financial Industry Regulatory Authority
OCIE will continue conducting inspections of FINRA's operations and regulatory programs, and focus resources on assessing the examinations of individual broker-dealers.
OCIE will continue its ongoing initiative to examine for cyber-security compliance procedures and controls, including testing the implementation of those procedures and controls at broker-dealers and investment advisers.
The published priorities for 2017 may be adjusted in light of market conditions, industry developments, and ongoing risk assessment activities. OCIE selected the priorities in consultation with the Commission, the SEC’s policy divisions and regional offices, the Division of Enforcement, the SEC’s Investor Advocate, and other regulators.
The population of registered entities that OCIE oversees consists of more than 4,000 broker-dealers (including approximately 162,000 branch offices and 640,000 registered representatives), more than 12,000 investment advisers (with nearly $67 trillion in assets under management), approximately 850 fund complexes (representing close to 11,000 mutual funds and exchange-traded funds), more than 400 transfer agents and over 650 municipal advisors.
OCIE also has oversight responsibility for 20 national securities exchanges, FINRA, the Municipal Securities Rulemaking Board, the Securities Investor Protection Corporation, eight clearing agencies, and the Public Company Accounting Oversight Board.
The Dodd-Frank Act increased OCIE’s responsibilities to include security-based swap dealers, security-based swap data repositories, major security-based swap participants, and securities-based swap execution facilities. The Jumpstart Our Business Act further expanded its responsibilities to include oversight of crowdfunding portals.