Today, the Securities and Exchange Commission published its 2014 priorities for its National Examination Program (“NEP”). These priorities cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents. Similar to the 2013 priorities, the 2014 priorities were published to focus on areas that are perceived by the SEC staff to have heightened risk.
The examination priorities address market-wide issues and those specific to each of the NEP’s four program areas — (i) investment advisers and investment companies(“IA-IC”), (ii) broker-dealers (“B-D”), (iii) exchanges and self-regulatory organizations (“SROs”, and collectively, “market oversight”), and (iv) clearing and transfer agents (“CA” and “TA”). For investment advisers and investment companies, the SEC has specifically outlined its priorities as follows:
- Core Risks
- Safety of Assets and Custody
- Conflicts of Interest Inherent in Certain Investment Adviser Business Models
- Marketing Performance
- New and Emerging Issues and Initiatives
- Never-Before Examined Advisers
- Wrap Fee Programs
- Quantitative Trading Models
- Presence Exams
- Payments for Distribution in Guise
- Fixed Income Investment Companies
- Policy Topics
- Money Market Funds
- “Alternative” Investment Companies
- Securities Lending Arrangements
The market-wide priorities include fraud detection and prevention, corporate governance and enterprise risk management, technology controls, issues posed by the convergence of broker-dealer and investment adviser businesses and by new rules and regulations, and retirement investments and rollovers.
The full SEC press release can be found HERE and a full text of the 2014 Examination Priorities can be found HERE.