The SEC has published its annual examination priorities for 2022.
For those who have been in the industry for any amount of time, this is an expected annual tradition. In fact, the SEC noted that they’re commemorating ten years of publishing exam priorities this year.
Why Does the SEC Publish Exam Priorities Annually?
According to the SEC, publishing its annual exam priority list supports its mission of “promoting and improving compliance, preventing fraud, monitoring risk, and informing policy.”
The exam priorities guide gives firms an idea of what to expect and prepare for each year. It also offers consumers and the public a greater understanding of how the SEC is working to safeguard and create transparency for consumers.
Is the List the Same Each Year?
The list changes each year as priorities change and new challenges emerge.
For example, the SEC shared that cyber-related concerns were not included on their earliest exam priorities list. With the proliferation of technology and today’s fast-moving, digitally-driven marketplace, cybersecurity, and technology now maintain a constant presence on regulators’ watch lists.
What’s on the Exam Priorities List This Year?
You can expect to see all the usual suspects. It’s of utmost importance to the SEC that your firm is protecting and serving its customers with integrity and transparency. The typical items will be covered:
- Fee calculations
- Accurate and complete written supervisory procedures
- ADV Part 2As that adequately disclose ALL fees being charged to clients
- Reg BI
- Form CRS compliance
In addition, the SEC highlighted other issues that are on their radar, including:
- Private funds, including controls for material nonpublic information and additional reviews about Special Purpose Acquisition Companies (SPACs)
- ESG investing disclosures, given the potential that inaccurate reporting and disclosure could materially mislead investors
- Information security and safeguards are put in place to monitor vendors, protect customer/client information, and respond quickly and effectively to intrusive incidents.
- Cryptocurrency and emerging technologies, and whether institutions are properly assessing and mitigating related risks
Any Advice on Preparing for the 2022 Examinations?
According to the SEC, organizations that have developed solid and resilient compliance programs have these things in common:
- Inclusivity: In these organizations, compliance has a seat at the table. They don’t work in a silo; they’re integrated into the life of the business. At the same time, business leaders across the organization learn about compliance and receive education on pertinent issues. The teamwork and partnership within these organizations ensure a better overall view of compliance efforts and a deeper understanding of the business’s compliance requirements and needs.
- Change Management: Compliance needs evolve and grow as the market and regulations change. The most effective compliance teams ensure they’re creating plans and aren’t “setting and forgetting” them. They monitor risks and challenges, then make adjustments as needed to ensure the overall health and success of the organization’s compliance programs.
- Reviews and Testing: You may have heard the saying, “You don’t know what you don’t know.” Conducting regular inspections and testing makes it more likely that you’ll see and repair any gaps in your organization’s processes. Resilient organizations test their compliance strength when changes are made in business processes, when new regulations are put in place, and when issues arise.
It’s also worth mentioning that regulators consider technology a mandatory requirement for running an effective compliance program. It’s not optional… and Excel spreadsheets are not considered technology in this situation. They expect your firm to have a robust regtech compliance system to ensure you properly track and maintain the appropriate documents and reviews.
Remember, it is easier to maintain a robust compliance program than fix a broken one. If you need support in ensuring your firm is up-to-date and ready for the next round of examination, reach out to our team of compliance consultants. Their expertise can get you prepared and well-equipped for anything the regulators may ask during their exam visit.
About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.