The SEC's exam priorities in 2020 will focus on market infrastructure, digital assets and issues important to retirement savers such as fees, expenses and conflicts of interest, according to the Securities and Exchange Commission's office of compliance inspections and examinations.
In a report released Tuesday, the OCIE said it will prioritize protecting retail investors, specifically those saving for retirement. Exams will focus on recommendations and advice given to retail investors, including on registered firms' disclosures and supervision of outside business activities of its employees and associated persons, and any conflicts that may arise from those activities.
OCIE said it will also continue to examine registered investment advisers to assess whether they're providing advice in the best interests of their clients and "eliminate or at least expose through full and fair disclosure all conflicts of interest (that) might incline an RIA, consciously or unconsciously, to render advice (that) is not disinterested," the report said.
On market infrastructure, exam priorities will continue to look at service providers such as clearing agencies, national securities exchanges and transfer agents.
With respect to digital assets, OCIE said it recognizes that advancements in financial technologies, methods of capital formation and market structures, as well as registered firms' use of new sources of data "warrant ongoing attention and review." OCIE's examinations will assess measures like investment suitability, portfolio management and trading practices, safety of client funds and assets, and pricing and valuation, it said in the report.
"As markets evolve, so do risks and potential harm to investors," said OCIE Director Pete Driscoll, in a news release. "OCIE continually works to adjust its examination focus areas to target these risks and publishes its annual priorities to communicate where we see the potential for increased risk and related harm. We hope that this transparency helps firms evaluate and improve their compliance programs, which ultimately helps protect investors."
To formulate the examination priorities, feedback is gathered from examination staff, who also consult with the commissioners, other divisions, the SEC's investor advocate and other regulators.
In fiscal year 2019, which ended Sept. 30, OCIE completed 3,089 examinations, a 2.7% decrease from the previous fiscal year.