What broker dealers should expect from the SEC on compliance
February 24, 2014
SEC highlights compliance on the forefront of its four-year strategic plan and announces its new exam initiative
In the last month, the U.S. Securities and Exchange Commission (SEC) has issued two documents that stress the importance of compliance in regulated markets: its Strategic Plan for Fiscal Years 2014-2018 and its new initiative to contact registered investment advisers (RIAs) that have never been examined by the commission.
The SEC’s draft of its four-year strategic plan gives prominence to a strong “culture of compliance” in the securities markets. It lists more than 70 initiatives it intends to improve upon and stresses the SEC’s intention to look into current regulatory initiatives and guidance governing registered investment companies. The SEC will also provide continued enhancement of its oversight of broker-dealers to ensure the public is being adequately protected.
One of the key initiatives of the plan is “Enhancing technological resilience of security firms and foster compliance with federal security laws.” With this, the SEC looks to help safeguard the technological systems used by securities markets, firms and other key market participants against failures and security breaches.
Never-Before Examined Initiative
In a letter dated February 20, 2014, the SEC contacted RIAs that have never been examined, with a specific focus on advisors who have been registered for three or more years . Known as the Never-Before Examined Initiative, it puts these RIAs on notice that they should be prepared for a risk-focused exam sometime in 2014.
RIAs are required to adopt and implement written compliance policies and procedures that are reasonably designed to prevent violations of the Advisers Act. This exam will look into advisors’ overall business activity, including their books, records and offline/online marketing materials, with specific attention placed on the effectiveness of their compliance program. Governance and supervision of technology used for compliance will also be examined.
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