SEC Announces 2016 Exam Priorities

On January 11, 2016, the Securities and Exchange Commission (SEC) announced its annual list of examination priorities for 2016. Similar to last year’s release, the SEC plans to focus on three thematic areas, which include:

  1. Protecting Retail Investors (with an express emphasis on investing for retirement)
  2. Assessing Market-Wide Risk
  3. Using Data Analytics to identify Potential Illegal Activity

Protecting Retail Investors

Protecting retail investors, including those investing for retirement, remains a priority in 2016. In addition to continuing its multi-year examination initiative, ReTIRE, the OCIE also plans to zone in on exchange traded funds (ETFs), the heightened supervision of branch offices, account types and whether recommendations are in the best interest of the retail investor, suitability of variable annuities, and pay-to play and certain other key risk areas related to public pension advisors.

Product-Related Training: EFT Investing, Supervision of Registered Representatives, Changes to FINRA Supervision Rules, Complex Products and Heightened Supervision, Wrap Fee Accounts, Mutual Fund Fee Waivers, Suitability of Variable Annuity Products, Compliance Safety Measures when Working with Senior Investors [see course catalog]

Assessing Market-Wide Risk

The SEC’s mission includes not only protecting investors and facilitating capital formation, but also maintaining fair, orderly and efficient markets. To do this, the OCIE will continue to focus on cybersecurity controls at broker-dealers and investment advisory firms. The OCIE will additionally examine SCI entities to evaluate whether they have established, maintained and enforced written policies and procedures reasonably in an effort to strengthen the technology infrastructure of the US securities markets. It will also examine advisers to mutual funds, ETFs and private funds that have exposure to potentially illiquid fixed income securities.

Product-Related Training: Cybersecurity, Customer Data Protection, Non-Traditional ETFs, Advanced Look at Mutual Funds, Alternative Mutual Funds and Retail Customer Suitability, Mutual Fund Break Points and Share Classes, Gifts and Gratuities: Guidance on FINRA Rule 3220 [see course catalog]

Using Data Analytics to Identify Potential Illegal Activity

The OCIE’s enhanced ability to analyze large amounts of data will assist examiners’ ongoing initiatives to assess anti-money laundering compliance, detect microcap fraud, and review for excessive trading. They will also focus on detecting the promotion of new, complex, and high-risk related products and related sales practice issues to identify potential suitability issues and potential breaches of fiduciary obligations.

Product-Related Training: Advanced Anti-Money Laundering Overview, Anti-Money Laundering Compliance Obligations for Retail Representatives, Anti-Money Laundering for Broker Dealers, Anti-Money Laundering Detection and Prevention for Agents, Complex Investment Strategies, Complex Products and Heightened Supervision, Insider Trading [see course catalog]

The description of the OCIE priorities is not exhaustive. While we suggest you cover training topics mentioned throughout this resource guide, it is also important you review training specific to your firm’s size, products and unique risks.

To read the complete 2016 SEC Examination Priorities Letter, click here.

To skim through Quest CE’s 2016 Firm Element Course Catalog, click here.