Perhaps the Securities and Exchange Commission saw the government shutdown coming when it published its 2019 exam priorities on December 20.
- Compliance and Risks in Critical Market Infrastructure – Examiners will focus on entities that provide services critical to the proper functioning of capital markets, including clearing agencies, national securities exchanges, and transfer agents
- FINRA and MSRB – The SEC will examine on FINRA’s operations and regulatory programs and the quality of FINRA’s examinations of broker-dealers and municipal advisors and MSRB’s effectiveness of select operations and internal policies, procedures, and controls for municipal advisers.
- Digital Assets – The SEC is focused on the risks of Bitcoin and other cryptocurrency to retail investors for fraud and violations of securities laws.
- Retail Investors– As has been the case for the past few years, examiners will focus on protecting Main Street investors. Examinations will likely include the disclosure and calculation of fees, expenses, and other charges retail investors pay, the supervision of representatives selling products and services to investors, broker-dealers entrusted with customer assets, and portfolio management and trading.
- Cybersecurity – Each examination program will prioritize cybersecurity with an emphasis on proper configuration of network storage devices, information security governance, and policies and procedures related to retail trading and information security.
- Anti-Money Laundering Programs – Examiners will review applicable anti-money laundering requirements, including whether firms are appropriately adapting their AML programs to address their regulatory obligations.
For private funds, there is not much on the list that should catch the attention of compliance professionals.
For retail investors, the SEC often points out that pension funds are conduits for retail investors. That means private funds with pension fund investors are not outside the scope of these exam priorities. The emphasis seems to be towards never been examined advisers in the retail space.
Many advisers and fund managers have been running robust anti-money laundering programs even though there is no specific requirement to have one in place. The anti-money laundering item in the priorities goes on to state that it is focused on broker-dealer compliance with anti-money laundering requirements.
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