Coast to coast
compliance
The SEC has released its 2023 Examination Priorities Report, which highlights what the Division will focus on for examinations. The SEC Press Release also reminds registrants that this is not an exhaustive list of what the SEC will look at in an exam. Thorough analysis of a registrant’s history, services, operations, products, and other risk factors all fall within the scope of an SEC examination.
Division of Examinations Director Richard R. Best states, “Our priorities reflect the changing landscape and associated risks in the securities market and are the product of a risk-based approach to examination selection that balances our resources across a diverse registrant base. We will emphasize compliance with new SEC rules applicable to investment advisers and investment companies as well as continue our focus on emerging issues and rules aimed at protecting retail investors.”
Compliance with the New Marketing Rule
With the signing of the New Marketing Rule (Advisers Act Rule 206(4)-1), the Division will focus on ensuring registrants have “adopted and implemented written policies and procedures that are reasonably designed to prevent violations by the advisers and their supervised persons of the new rule”.
Registered Investment Advisers to Private Funds
Examinations will assess specific risk characteristics pertaining to private funds and will review issues under the Advisers Act, specifically relating to fiduciary duties, compliance programs, fees and expenses, conflict of interest, etc.
Retail Investors and Working Families
Obligations under Regulation Best Interest and the fiduciary standard set by the Advisers Act will be an area of scrutiny to ensure registrants are acting in the best interests of retail investors. Examinations will assess practices related to reviewing investment alternatives, management of conflicts of interest, and consideration of investment goals and account characteristics.
Environmental, Social, and Governance (ESG) Investing
The Division remains focused on determining whether funds are operating in alignment with their ESG-related disclosures, whether ESG products are appropriately labeled, and if recommendations for those products align with the investors’ best interests.
Information Security and Operational Resiliency
The Division will review practices that registrants have implemented to prevent interruptions to mission-critical services and to protect investor information, records, and assets. Examinations will focus on the cybersecurity issues associated with the use of third-party vendors, including registrant visibility into the security and integrity of third-party products and services and whether there has been an unauthorized use of third-party providers.
Emerging Technologies and Crypto-Assets
The Division will carefully examine registrants that use emerging financial technologies or new practices, including solutions that assist them to meet compliance and marketing demands, as well as servicing their investor accounts. “Examinations of registrants will focus on the offer, sale, recommendation of, or advice regarding trading in crypto or crypto-related assets and include whether the firm (1) met and followed their respective standards of care when making recommendations, referrals, or providing investment advice; and (2) routinely reviewed, updated, and enhanced their compliance, disclosure, and risk management practices.”
Coast to Coast Compliance can help give your firm and staff the confidence and preparedness to succeed in an SEC examination by conducting a mock SEC examination which includes the requesting and reviewing of key compliance and business documents, as well as the interviewing of various firm personnel. Coast to Coast Compliance can also provide a final exam interview, or written report if requested, covering the scope of the mock SEC examination, relevant findings, and any resulting recommendations.
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