Per tradition, the SEC announced its 2019 examination priorities this month. The SEC’s Office of Compliance Inspections and Examinations releases such a report at the beginning of each year to identify key issues the SEC’s examiners will be focused on when conducting exams (and determining who to examine) in the coming year. This report provides a useful overview of existing and new compliance priorities that are top of mind for the nation’s largest securities regulator. As such, it provides a very helpful tool for RIAs—whether SEC-registered or state-registered—to use when reviewing their own compliance practices.
Below, in bullet form, are the SEC’s top priorities for 2019. Each of these priorities are continuing from prior years. More details on each of these priorities are included in the SEC’s report, itself.
2019 SEC Exam Priorities
Matters of importance to retail investors, including seniors and those saving for retirement
Compliance and risk in registrants responsible for critical market infrastructure
Select areas and programs of FINRA and MSRB
The SEC and other securities regulators continue to emphasize protection of seniors and vulnerable adults from financial exploitation, cybersecurity, and digital asset. I have written several articles on changes to federal and state laws in recent years to address this problem. RIAs should look to those new laws to learn about incentives offered to those financial services professionals who take action to stop or address financial exploitation of seniors and vulnerable adults.
The SEC also continues to emphasize the need for financial services firms to develop and adhere to robust cybersecurity policies and procedures. In today’s age of data breaches, sophisticated phishing scams, and wide-spread hacking attempts, it is increasingly important for financial services firms, large and small, to develop physical, administrative, and technical controls to protect confidential information from those wishing to exploit it for their own gain. This article offers some tips for firms to utilize when reviewing their existing cybersecurity policies.
The SEC also notes that it will continue to focus on financial services firms that engage in trading, or make recommendations involving, digital assets, such as cryptocurrencies, initial coin offerings and similar assets. In recent years, the SEC has taken numerous enforcement actions against issuers of securities involving such assets. As consumer awareness of these products grows, a market has grown for investment advisers, brokers, and other entities to assist in the trading of these assets. Also, more and more clients are asking financial services professionals about these products. Thus, it is highly important for financial services professionals that somehow assist clients in investing in these products to understand the products first. Only then can the professional adequately determine suitability and explain applicable risks to their clients. See here for more information on digital assets and initial coin offerings.
Links to prior SEC Exam Priorities letters are included below:
Brian Edstrom is a Shareholder and Attorney at Avisen
Legal, P.A. He brings to Avisen clients the ability to “speak regulator,” having
spent several years working for federal and state regulators in Washington D.C.
and Saint Paul, MN before entering private practice. Brian assists
clients in all aspects of working with securities regulators, whether it be to
obtain a license or registration, prepare for an audit, or respond to an
enforcement investigation. Brian also regularly advises clients on their
general business needs, particularly surrounding raising money through