- protecting retail investors and investors for retirement;
- assessing issues related to market-wide risks; and
- use of its ability to analyze data to identify and examine registrants that may be engaged in illegal activity.
The areas of focus include a few new priorities for 2016, including “liquidity controls, public pension advisers, product promotion, and two popular investment products – exchange-traded funds and variable annuities.” There is also a continued focus on “protecting investors in ongoing risk areas such as cybersecurity, microcap fraud, fee selection, and reverse churning.”
Retail and Retirement Investor Area
OCIE will undertake examinations to review exchange-traded funds (ETFs) and ETF trading practices, variable annuity recommendations and disclosure, and potential conflicts and risks involving advisers to public pension funds.
Market-Wide Risks Area
OCIE will focus on cybersecurity controls at broker-dealers and investment advisers. The evaluation of broker-dealers’ and investment advisers’ liquidity risk management practices, and firms’ compliance with the SEC’s Regulation Systems Compliance and Integrity (Regulation SCI) will also be areas of focus.
Data Analytics Area
OCIE will use data analytics to assess anti-money laundering compliance, detect microcap fraud, and review for excessive trading. Data analytics will also be used during examinations focused on promotion of new, complex, and high-risk products.
OCIE also expects to allocate resources to focus on municipal advisors, private placements, private fund advisers, transfer agents, and never-before-examined investment advisers and companies in 2016. Of course, these areas of focus are subject to change throughout the year as new issues arise.
SEC Chair Mary Jo White stated, “These new areas of focus are extremely important to investors and financial institutions across the spectrum,” and “through information sharing and conducting comprehensive examinations, OCIE continues to promote compliance with the federal securities laws to better protect investors and our markets.”
OCIE releases this information in the interest of transparency within the industry. OCIE Director Marc Wyatt stated, “We hope that registrants will use this information to inform the evaluation of their own compliance programs in these key areas.”
As Subject to Inquiry readers already know, it is important to have internal compliance programs that are communicated and followed throughout the organization. It is equally important to have internal compliance programs evaluated regularly. The release of this information by OCIE is an opportunity for companies to take a fresh look at their internal compliance programs and update as necessary.