The SEC Division of Examinations announced its 2022 examination priorities in late March. The announcement is available here. The priorities include a “focus on private funds, environmental, social and governance (ESG) investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto-assets.”
Regarding private funds, the Division will focus on registered investment advisers, including RIA’s fiduciary duty, compliance programs, fees, conflicts of interest, risk disclosures, and other issues.
For environmental, social and governance investing, the Division said examinations will “typically focus on whether RIAs and registered funds are accurately disclosing their ESG investing approaches and have adopted and implemented” procedures to prevent violating the federal securities laws.
For its retail investor focus, the Division will examine whether advice from broker-dealers and RIAs is in an investor’s best interest. The SEC referred specifically to registrants’ obligations under Regulation Best Interest and fiduciary standards under the Advisers Act.
The SEC said its focus on information security involves reviewing whether broker-dealers and RIAs have appropriate technology and measures in place to protect customer accounts.
Finally, for emerging technologies and crypto-assets, the Division “will conduct examinations of broker-dealers and RIAs that are using emerging financial technologies to review whether the unique risks these activities present were considered by the firms when designing their regulatory compliance programs. RIA and broker-dealer examinations will focus on firms that are, or claim to be, offering new products and services or employing new practices to assess whether operations and controls in place are consistent with disclosures made and the standard of conduct owed to investors and other regulatory obligations; advice and recommendations, including by algorithms, are consistent with investors’ investment strategies and the standard of conduct owed to such investors; and controls take into account the unique risks associated with such practices. Examinations of market participants engaged with crypto-assets will continue to review the custody arrangements for such assets and will assess the offer, sale, recommendation, advice, and trading of crypto-assets.”
