On December 17, 2020, SEC created the Division of Examinations by renaming the now defunct, Office of Compliance Inspections and Examinations, making it the SEC’s 6th Division joining Enforcement, Corporation Finance, Trading and Markets, Investment Management, and Economic and Risk Analysis (DERA).
A couple of months later, the new Examinations Division announced its 2021 examination priorities, carrying on OCIE’s long standing tradition of annually publishing its examination priorities. The publication of these priorities is supposed to provide a framework for those registered persons and entities to prepare for the onslaught of SEC examiners. These priorities will include a focus on climate-related risks; broker and RIA conflicts of interest; Reg BI; FinTech risks; ESG-related risks; proxy voting policies and practices; BCPs; mutual funds; ETFs; municipal securities and other fixed income securities; variable annuities; private placements; and microcap securities. The Division will also review information security and operational resiliency; safeguards for customer accounts and to prevent account intrusions; AML programs; LIBOR transition; RIA and IC compliance programs; Private Fund RIAs; municipal advisors; Customer Protection Rule and the Net Capital Rule; internal processes, procedures, controls, and compliance adequacies; review of requirements for borrowing securities from customers; best execution in a zero commission environment; order routing disclosure rules; Reg SHO market-maker compliance; clearing agencies; national securities exchanges; transfer agents; and oversight over FINRA and MSRB.
In short, the new Examinations Division will continue to pursue a broad package of priorities. Firms and those in the securities industry subject to these examinations should consult securities counsel prior to any contact with the SEC.