SEC and FINRA Exam Priorities for 2017

The Securities and Exchange Commission ("SEC") and FINRA have released their Exam Priorities for 2017. The SEC's 2017 priorities are organized around these areas: (1) examining matters of importance to retail investors; (2) focusing on risks specific to elderly and retiring investors; and (3) assessing market-wide risks. FINRA also issued its 2017 Regulatory and Examinations Priorities Letter, which identifies compliance, supervision and risk management as areas of focus. FINRA will be introducing a compliance calendar and a directory of service providers as tools to assist firms. FINRA will also be initiating electronic, off-site reviews to supplement traditional on-site cycle examinations. These off-site exams will affect only a select group of firms that are not currently scheduled for a cycle exam in 2017. The SEC priorities address issues across a variety of financial institutions including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers, national securities exchanges and municipal advisers. Under each category, a number of key exam areas include:

1 - Protecting Retail Investors: • Electronic Investment Advice • Wrap Fee Program • Exchange-Traded Funds • Never-Before Examined Investment Advisers • Recidivist Firms and their Employees • Multi-Branch Advisers • Share Class Selection

2 - Focusing on Senior Investors and Retirement Investments: • ReTIRE • Public Pension Advisers • Senior Investors

3 - Assessing Market Wide Risks:

  • Money Market Funds
  • Payment for Order Flow
  • Clearing Agencies
  • FINRA
  • Regulation Systems Compliance and Integrity
  • Cybersecurity
  • National Securities Exchanges
  • Anti-Money Laundering

4 - Other Initiatives:

  • Municipal Advisers
  • Transfer Agents
  • Private Fund Advisers

FINRA's top five exam priorities include:

  • High-risk and recidivist brokers;
  • Bad sales practices;
  • Practices that lead to financial risk;
  • Conduct that enhances operational risks; and
  • Market manipulation

The Examination Priorities Letter also includes a long list of other topics that FINRA will prioritize this year including product suitability, excessive and short-term trading of long-term products, outside business activities, social media and electronic communications, liquidity risk, credit risk policies, cyber-security, segregation of client assets, Regulation SHO, and anti-money laundering and suspicious activity monitoring.

To read the SEC & FINRA's 2017 Exam Priorities, please click on the links below:

https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2017.pdf

http://www.finra.org/sites/default/files/2017-regulatory-and-examination-priorities-letter.pdf

 

Cheryl Spratt