Audience: Investment Advisers, Private Fund Advisers and Broker-Dealers
Executive Summary on Top – The Division of Examinations (EXAMS) at the U.S. Securities and Exchange Commission (SEC) released its 2024 Examination Priorities in alignment with the beginning of its fiscal year.
Impacted entities should review EXAMS priorities for their impact on compliance programs, testing, and examinations.
Meris Law PLLC summarizes the U.S. Securities and Exchange Commission’s (SEC) 2024 examination priorities, which were unexpectedly released last week, aligning with the start of the SEC’s fiscal year. Remarkably, Environmental, Social, and Governance (ESG) considerations, which have been a focal point in previous years, were not explicitly mentioned in this year’s priorities. This omission does not necessarily mean that ESG is no longer critical, but it highlights a shift in focus for the upcoming year. Nevertheless, firms should remain diligent in furtherance of their ESG practices and priorities and not allow exhaustion to set in.
Summary of SEC’s 2024 Examination Priorities
The Division of Examinations (EXAMS) has outlined its focus for the upcoming year, considering:
Investor Protection and Market Integrity
Transparency and Compliance
Risk-Based Approach
It is important to note that the list below is incomplete. The Staff will also consider an entity’s history, operations, products, services, and other risk factors.
Potential Implications for Institutional Advisers, Private Fund Advisers and Institutional, and Investment Banking Broker-Dealers
Institutional Investment Advisers
Economic Incentives: Examination of incentives connected to investment adviser recommendations, focusing on revenue sharing and other incentivizing arrangements.
Disclosures: Ensuring they reflect all material facts related to conflicts of interest and informed consent.
Marketing Practices: Including private fund advisers, ensuring compliance with the new marketing rule.
Private Fund Advisers: Specific scrutiny on portfolio management risks, adherence to L.P. Advisory Committees, allocation, and calculation of private fund fees and expenses, due diligence practices, conflicts reviews, controls and disclosures, custody rule compliance, and Form P.F. compliance.
Institutional and Investment Banking Broker-Dealers
Product Recommendations: Focus on recommendations of non-traded REITs and private placements.
Dual Registrants: Particular attention to those with dual registrations and related conflicts of interest and disclosures.
Net Capital Compliance: Ensuring compliance with net capital requirements.
All Market Participants
Information Security and Operational Resiliency: Ensuring robust security measures and operational resilience.
Crypto Assets and Emerging Financial Technology: Scrutiny on practices related to these evolving areas.
Anti-Money Laundering: Ensuring effective anti-money laundering practices and policies and procedures are in place.
Potential Next Steps
Given these priorities, impacted entities should consider immediate steps to review and ensure their practices, disclosures, policies, and procedures align with the SEC’s focus areas in the upcoming examination cycle.
Contributor(s):
Samantha Osbourne, Esq.
Maya Brown, JD
Summary of SEC’s 2024 Examination Priorities
The Division of Examinations (EXAMS) has outlined its focus for the upcoming year, considering:
Investor Protection and Market Integrity
Transparency and Compliance
Risk-Based Approach
It is important to note that the list below is incomplete. The Staff will also consider an entity’s history, operations, products, services, and other risk factors.
Potential Implications for Institutional Advisers, Private Fund Advisers and Institutional, and Investment Banking Broker-Dealers
Institutional Investment Advisers
Economic Incentives: Examination of incentives connected to investment adviser recommendations, focusing on revenue sharing and other incentivizing arrangements.
Disclosures: Ensuring they reflect all material facts related to conflicts of interest and informed consent.
Marketing Practices: Including private fund advisers, ensuring compliance with the new marketing rule.
Private Fund Advisers: Specific scrutiny on portfolio management risks, adherence to L.P. Advisory Committees, allocation, and calculation of private fund fees and expenses, due diligence practices, conflicts reviews, controls and disclosures, custody rule compliance, and Form P.F. compliance.
Institutional and Investment Banking Broker-Dealers
Product Recommendations: Focus on recommendations of non-traded REITs and private placements.
Dual Registrants: Particular attention to those with dual registrations and related conflicts of interest and disclosures.
Net Capital Compliance: Ensuring compliance with net capital requirements.
All Market Participants
Information Security and Operational Resiliency: Ensuring robust security measures and operational resilience.
Crypto Assets and Emerging Financial Technology: Scrutiny on practices related to these evolving areas.
Anti-Money Laundering: Ensuring effective anti-money laundering practices and policies and procedures are in place.
Potential Next Steps
Given these priorities, impacted entities should consider immediate steps to review and ensure their practices, disclosures, policies, and procedures align with the SEC’s focus areas in the upcoming examination cycle.
Contributor(s):
Samantha Osbourne, Esq.
Maya Brown, JD
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