SEC Exam Priorities for 2018

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations announced its 2018 examination priorities. This year, the examination priorities are broken down into five categories:

  1. Compliance and risks in critical market infrastructure;
  2. Matters of importance to retail investors, including seniors and those saving for retirement;
  3. FINRA and MSRB;
  4. Cybersecurity; and
  5. Anti-money laundering programs.

The retail investor focus and the cybersecurity focus are carryovers from last year. MSRB was added to the FINRA focus. I expect cybersecurity will be on the list for the foreseeable future.

I think it’s interesting to see anti-money laundering on the list. The current rules are not explicitly applicable to many investment advisers and private fund managers. Those fall outside the definition of “covered financial institution.” Broker-dealers and mutual funds are “covered financial institutions.”

This was true in the latest AML customer due diligence released by FiinCEN in 2016. FinCEN released a proposed rule to include investment advisers in the general definition of “financial institution” in 2015. That proposed rule seems to have stalled out.

On top of that, the rules and regulations are not generated by the SEC. Regardless, it’s against the law to do financial transactions with people and companies on the sanctions list. At a minimum, advisers should be checking their investors and clients against those lists.

It will be interesting to see how that works it’s may into the examination process. perhaps part of it will be fact-finding for once again creating an explicit rule for investment advisers.

Sources:

Add a Comment

Your email address will not be published. Required fields are marked *