Episode 31: 2019 SEC OCIE Exam Priorities (Part 1)

In this CCO Buzz we have Compliance Consultant Adam Stutz rejoining us to briefly discuss the newly released 2019 SEC Exam Priorities, as part of a two part series.

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CCO Buzz: Hello, welcome back and Happy New Year! We here at the CCO Buzz are ready to hit 2019 running. So, for episode 31 we have Core Compliance’s very own Compliance Consultant Adam Stutz. Adam join us to briefly discuss the newly released 2019 SEC Exam Priorities. And I hear he also has a special offer for CCO Buzz listeners that are interested in attending the 2019 Annual Core Compliance Workshop later this month in Anaheim, CA.

So, with that, let’s get started…

Adam Stutz: Happy New Year and welcome to 2019! In December, the SEC’s Office of Compliance Inspections and Examinations or “OCIE” has released its 2019 exam priorities and is gearing up for a busy year of examinations of investment advisory firms.  In typical fashion, OCIE’s exam priorities cover a wide array of topics and are designed to address their fundamental mission of promoting compliance, preventing fraud, identifying and monitoring risk, and informing policy. Due to new risks and the evolution of existing risks within the industry, OCIE’s exam priorities have shifted to meet its mission of ensuring heightened oversight of the securities industry. In this CCO Buzz we’re going to look at a few of the exam priorities and what these priorities mean for investment advisory firms.

For 2019, OCIE will focus on certain areas of the securities industry and U.S. markets that represent increased risk for investors. The six areas that OCIE plans to focus on include:

  • Retail Investors, including seniors and those saving for retirement
  • Compliance and risk in registrants responsible for critical market infrastructure
  • Continued focus on FINRA and the MSRB
  • Digital Assets
  • Cybersecurity; and, last but not lease
  • Anti-money laundering

For Retail Investors, including seniors and those saving for retirement, OCIE plans to focus on the Disclosure of the Costs of Investing, this would include:

  • Fees and expenses that are calculated and charged in accordance with the disclosures provided to investors.
  • Fees charged to advisory accounts, particularly where the fee is dependent on the value of the account, and the assessment to whether assets are valued in accordance with investor agreements, disclosures, and the firm’s policies and procedures.
  • And to focus on firms that have practices or business models that may create increased risks that investors will pay inadequately disclosed fees, expenses, or other charges.

OCIE will also focus on Electronic Investment Advice, with a focus on registrants’ compliance programs, including the oversight of computer program algorithms that generate recommendations, marketing materials, investor data protection, and disclosure of conflicts of interest.

With respect to Senior Investors and Retirement Account Products, examinations of investment advisers and broker-dealers that offer services and products to investors with retirement accounts will focus on, among other things, investment recommendations, sales of variable insurance products, and sales and management of target date funds.

Also, examiners will focus on the facilitation and involvement in retirement vehicles that primarily serve state and local government employees and non-profit employees, including 403(b) and 457 plans.

As for Cybersecurity, OCIE will continue to prioritize cybersecurity in each of their examination programs. Their examinations have and will continue to focus on, among other things, governance and risk assessment, access rights and controls, data loss prevention, vendor management, and training and incident response.

Lastly, for Anti-Money Laundering, in 2019, OCIE will continue to focus a portion of our resources on examining whether the entities the SEC regulates are appropriately adapting their AML programs to address their obligations. Their reviews will cover, for example, the customer due diligence requirement and will look to determine whether these entities are taking reasonable steps to understand the nature and purpose of customer relationships and to properly address those risks. They will also assess whether these entities are filing timely, complete, and accurate SARs. And lastly, they will take steps to evaluate whether these entities are conducting robust and timely independent tests of their AML programs.

CCO Buzz: Wow, that’s a lot to consider… How about we continue this discussion for next week’s CCO Buzz to tease our listeners a bit. But, I did here that you had a special offer for CCO Buzz listeners in regard to the 2019 Annual Core Compliance Workshop. So, what do you got?

Adam Stutz: Oh, we do! We are offering all of our CCO Buzz Listeners an exclusive $100 discount code that is applicable to registration costs. Listeners should use the code BUZZ2019 to receive $100 off.

If you’d like any additional information on our workshop, help reviewing and understanding OCIE’s 2019 exam priorities or have questions or require assistance with reviewing and strengthening your compliance program, give us a call at 619-278-0020. Thanks!

CCO Buzz: Well that’s it for this week’s episode. If you’d like additional information, please check out our website at www.corecls.com. You can also follow us on Facebook, LinkedIn or Twitter @CoreCLS. Thank you and we hope you tune into next week’s episode of the CCO Buzz.

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