On January 13, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released its 2015 examination priorities for investment companies, investment advisers, broker-dealers and transfer agents. The examination priorities highlight new and continuing areas of interest, including, but not limited to, liquid alternatives, fixed-income funds and retirement investing by retail investors.
Retail Investors’ Investment in Liquid Alternatives and Fixed-Income Funds
OCIE notes that retail investors are investing in alternative and institutional private funds, illiquid investments and structured products. It will focus on fee arrangements, improper or misleading sales practices, suitability and branch office supervision.
OCIE also will assess alternative investment companies with respect to: (1) leverage, liquidity and valuation issues; (2) adequacy of such funds’ internal controls; and (3) marketing issues. It also will review fixed-income mutual funds with respect to compliance policies and procedures and internal controls to ensure that disclosures are not misleading.
Market-Wide Risks and Data Analytics
OCIE’s market-wide risk assessment will focus on large firm monitoring, systemically important clearing agencies, financial firms’ cybersecurity systems and best execution order routing. OCIE will use data analytics to uncover fraudulent activity such as individual misconduct, microcap fraud, excessive trading and money laundering.
Other examination areas include, but are not limited to, municipal advisors, proxy services, registered investment companies that have never been examined and private equity fees and expenses.
Click here to read the 2015 SEC Examination Priorities.