Friday, October 27. 2023
In the 2024 publication, the Division addresses a number of significant concerns and developments impacting the market and investors, including the following:
The Division will focus on advisers’ compliance programs, including whether their policies and procedures reflect the various aspects of the advisers’ business, compensation structure, services, client base, and operations, and address applicable current market risks.
The Division will prioritize examinations of registered investment companies, including mutual funds and ETFs, due to their importance to retail investors, particularly those saving for retirement.
The Division will continue to place special attention on the following:
- Regulation Best Interest, which establishes the standard of conduct for broker-dealers at the time they recommend to a retail customer a securities transaction or investment strategy
- Form CRS, which requires SEC-registered investment advisers and SEC-registered broker-dealers to provide retail investors with a brief customer or client relationship summary that provides information about the firm
- Broker-Dealer Financial Responsibility Rules, which enforce broker-dealer compliance with the Net Capital Rule and the Customer Protection Rule and related internal processes, procedures and controls
- Broker-Dealer Trading Practices, which enforce broker-dealer compliance with: Regulation SHO (including the rules regarding aggregation units and locate requirements); Regulation ATS (and whether the operations of alternative trading systems are consistent with the disclosures provided in Forms ATS and ATS-N); and Exchange Act Rule 15c2-11
The Division will continue to assess whether national securities exchanges are meeting their obligations to enforce compliance with the following self-regulatory organizations:
- National Securities Exchanges, which enforce compliance with self-regulatory organization rules and the federal securities laws
- Financial Industry Regulatory Authority, which writes and enforces rules, examines firms for compliance and educates investors
- Municipal Securities Rulemaking Board, which regulates the activities of broker-dealers that buy, sell, and underwrite municipal securities and municipal advisors
Title VIII of the Dodd-Frank Act requires the SEC to examine, at least once annually, each clearing agency designated as systemically important and for which the SEC serves as the supervisory agency. The Division will focus on clearing agencies’ core risks, processes, and controls and will cover the specific areas required by statute, including the nature of clearing agencies’ operations and assessment of financial and operational risk.
Other Market Participants
The Division will review whether municipal advisors have met their fiduciary duty obligation to clients, particularly when providing advice regarding the pricing, method of sale, and structure of municipal securities
Risk Areas Impacting Various Market Participants
The Division will also focus on the following risk areas:
- information security and operational resiliency
- crypto assets and emerging financial technology
- regulation systems compliance and integrity
- anti-money laundering
The priorities released in this publication are not comprehensive and do not represent all of the areas the Division focused on in its examinations, risk alerts, and outreach. The priorities are driven by the Division’s examinations, but the range of any examination is decided through a risk-based approach that includes assessment of an entity’s history, operations, services, products offered, and other risk factors.
The Division invites public inquiries and comments on the 2024 Examination Priorities. For more details on the 2024 Examination Priorities, including instruction on how to submit feedback, visit the SEC’s Division’s webpage.