On March 3, 2021, the Security and Exchange Commission’s Division of Examinations (formerly the Office of Compliance Inspections and Examinations, now either “the Division” or “EXAMS”) announced its fiscal year 2021 examination priorities. For 2021, EXAMS’ priorities fit into several broad categories:
Retail investors, including seniors and those saving for retirement (focusing on disclosure and calculation of fees, as well as the supervision of representatives selling products and services to investors)
Information security and operational resiliency (focusing on shifts to remote services due to the global pandemic)
Financial technology and innovation (focusing on investments and portfolio management in digital assets)
Anti-money laundering (focusing on compliance with AML programs)
The LIBOR transition
Specific RIA, investment companies, and broker-dealer rules
Risks in critical market infrastructure (e.g., examining clearing agencies and national securities exchanges)
FINRA and MSRB (keeping tabs on self-regulatory organizations)
EXAMS noted that despite logistical challenges posed by the pandemic, the Division still completed 2,952 examinations in FY 2020, which was a mere 4.4 percent decrease from FY 2019. The number of RIA firms subject to SEC oversight has increased to more than 13,900. The SEC has stated that they expect to be able to cover about 15% in FY 2021. Firms selected for examination are chosen according to a risk-based analysis, which varies depending on the type of firm and its business activities.
Each year, the Division publishes its priorities to inform industry of policy, improve compliance, prevent fraud, and monitor risk. Its published priorities are not exhaustive, and additional priorities may be added should new trends or risks emerge. We will continue to monitor developments throughout the year.
This client alert is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have any questions regarding this update, or for more information about this topic, please contact any of the attorneys in our Financial Services & Investment Management practice group, or the attorney with whom you normally consult.