On January 9, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued its annual “hot-topics” list of examination priorities for 2014.
National Exam Program Priorities across OCIE’s entire program include:
1. Fraud Detection & Prevention
2. Corporate Governance, Conflicts of Interest & Enterprise Risk Management
3. Technology
4. Dual Registrants (BD & RIA)
5. New Laws & Regulation
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Rule 506(c) Accredited Investors
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Crowd-funding
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Municipal Advisors
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New Registrants under Dodd-Frank
6. Retirement Vehicles & Rollovers (IRA & 401k) suitability, conflicts, etc.
Investment Advisor / Investment Company specific initiatives include:
Core:
1. Asset Safety & Custody
2. Conflicts Inherent in Business Models
3. Market Performance Claims and Disclosures
New Issues:
4. New, Un-Examined Advisors
5. Wrap-Fee Programs
6. Quantitative Trading Models
7. Presence Exams
8. Payments for Distribution in Guise
9. Fixed Income Investment Companies
Policy:
10. Money-Market Funds
11. “Alternative” Investment Companies
12. Securities Lending
Broker-Dealer initiatives include:
Core:
1. Sales Practices / Fraud (affinity; micro-cap; unsuitable products)
2. Supervision
3. Trading, especially HFQ and algorithmic trading
4. International Controls
5. Financial Responsibility
6. AML
New Issues
7. Market Access Rule 15c3-5
8. Suitability of VA Buybacks
9. Fixed Income Market
Market Oversight initiatives included:
1. FINRA Oversight
2. Exchange Exams
3. New Registrants, including security-based swaps execution facilities
4. Section 31 Fee Exams
Clearing & Settlement initiatives include:
Clearing:
1. Dodd-Frank Mandated Exams (DTC; NSCC; IFCC: OCC)
2. Rule 17Ad-22 Compliance
3. New Registrants
Transfer:
1. Transfer Agent Core Activities
2. Other Areas: Microcap; 3rd Party Administration
3. Direct Registration
4. Business Continuity and Disaster Recovery Plans
