The Securities and Exchange Commission is going to cast a wider net this year. According to the Office of Compliance Inspections and Examinations (OCIE) Director Marc Wyatt, the OCIE intends to build on its successes of the last four years and in 2016, push the envelope further.
“For the last four years,” Wyatt says, “OCIE’s transparency and information sharing has helped inform the industry. We hope that registrants will use this information to inform the evaluation of their own compliance programs in these key areas.”
In addition to its ongoing monitoring of your compliance and risk management systems, processes and procedures, the OCIE will be looking at:
The SEC also seeks continued protection of investors in such ongoing risk areas as:
“These new areas of focus are extremely important to investors and financial institutions across the spectrum,” says SEC Chair Mary Jo White. “Through information sharing and conducting comprehensive examinations, OCIE continues to promote compliance with the federal securities laws to better protect investors and our markets.”
The SEC will be watching everyone
The SEC’s 2016 Examination Priorities letter focuses on the compliances issues of such financial institutions as investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, and national securities exchanges.
In particular, the OCIE will continue to its roll out ReTIRE, now six months old. This multi-year examination initiative focuses on SEC-registered investment advisers and broker-dealers and the services they offer to investors with retirement accounts. If you are not already aware, be forewarned that this includes examining the reasonable basis for recommendations made to investors, conflicts of interest, supervision and compliance controls, and marketing and disclosure practices.
Appearances are everything — even in branch offices
Are your branch office reps doing the right thing? The SEC expects you to have appropriate oversight in place to ensure it.
To that end, it will continue to review regulated entities’ supervision of registered representatives and investment adviser representatives in branch offices of SEC-registered investment advisers and broker-dealers. It will be using data analytics to identify registered representatives in branches that appear to be engaged in potentially inappropriate trading.
Do you continue to have appropriate compliance policies and procedures
Of course, your regulation Systems Compliance and Integrity (SCI) policies and procedures are in full force. But just in case, the SEC will be examining your SCI entities. It will evaluate them to determine whether they have established, maintained, and enforced written policies and procedures reasonably designed to ensure the capacity, integrity, resiliency, availability, and security of their SCI systems.
This will include, among other things, assessing the resiliency of primary and backup data centers, evaluating whether computing infrastructure components are geographically diverse, and assessing whether security operations are tailored to the risks each entity faces.
The SEC’s OCIE will be more active in 2016
You know it’s only a matter of time before the regulators show up at your door, so be prepared. Get your compliance processes and procedures, and your documentation in order. Regulatory oversight is not going to go away. In fact, judging by the SEC and FINRA’s 2016 Priorities Letters, compliance is a top priority, which means you will be doing more internal oversight and enforcement of your own policies and procedures. Forget about free evenings, nights and weekends!
Let’s talk (212- 233-1155).