March 01, 2013
On February 21, 2013, the US Securities and Exchange Commission (the “SEC”) released its examination priorities for 2013. The priorities were published by National Examination Program (“NEP”), a program administered through the SEC’s Office of Compliance Inspections and Examinations, including market-wide areas of focus as well as issues specific to investment advisers and investment companies, broker-dealers, clearing and transfer agents, and market oversight. Areas identified by NEP as priorities are summarized below.
NEP identified the following as areas of heightened risk:
Of particular note is the focus on safety of client assets and compliance with the requirements of Rule 206(4)-2 of the Investment Advisers Act of 1940 (the “Advisers Act”), commonly referred to as the “Custody Rule.” Investment advisers should note that examinations this year will likely look to whether advisers are:
New and Emerging Issues
NEP identified the following as areas that carry increased risk as a result of recent developments in the industry:
With respect to new registrants, NEP noted that since the Dodd-Frank Wall Street Reform and Consumer Protection Act became effective in 2012, approximately 2,000 investment advisers have newly registered with the SEC. In response, the NEP is planning a two-year initiative to establish a presence with these advisers. The initiative will focus on engaging the new registrants, examining a substantial percentage of such registrants, analyzing the findings, and reporting the results to the industry.
Finally, NEP identified additional topics over which it intends to gain a better understanding. These policy topics are:
NEP’s complete examination priorities for 2013 are available here.