SEC Exam Priorities for 2016

The SEC’s Office of Compliance Inspections and Examinations or OCIE announced its examination priorities for 2016. Those priorities generally “reflect certain practices and products that OCIE perceives to present potentially heightened risk to investors and/or the integrity of the U.S. Capital markets,” according to the release.

The examination priorities are built on the same three themes as last year. Those are: 1) Matters important to retail investors and saving for retirement; 2) market-wide risk issues; and 3) the use of data analysis to ascertain if there is illegal activity. Under each category OCIE identified a number of key exam areas which include:

1) Protecting retail investors and retirement savings:

· ReTIRE which includes examining the reasonable basis for recommendations, conflicts and supervision and compliance controls

· ETFs focusing on sales strategies, trading practices and disclosures

· Fee Selection and reverse churning

· Variable annuities, including an assessment of suitability and the adequacy of the disclosures, and

· Public pension advisers, focusing on pay-to-play and other key risk areas

2) Market wide risk, including an assessment of structural risks and trends that may involve multiple firms or entire industries:

· Cybersecurity

· Regulation systems compliance and procedures

· Liquidity controls, and

· Clearing agencies

3) Data analytics to identify potential illegal activity:

· Recidivist representatives and their employers

· Anti-money laundering

· Microcap fraud

· Excessive trading, and

· Product promotion

OCIE also has initiatives which include: Municipal advisors, private placements, never-before-examined investment advisers and investment companies, private fund advisers and transfer agents.