SEC’s 2015 Plan Includes Adviser and Fund Risk Management Practices
The SEC will evaluate investment adviser and fund risk management practices in 2015, according to its 2014 Agency Financial Report. Under “Looking Forward,” the SEC says it will “consider significant enhancements to the risk management practices of investment fund and advisers.” The SEC will focus on “liquidity risk management, stress testing, the use of derivatives, and transition planning.” The SEC Enforcement and Examination Divisions will scrutinize (i) broker-dealers for churning and AML compliance, (ii) sales and marketing practices where firms recommend proprietary products for retirement accounts; (iii) supervision of information technology systems; and (iv) order routing. Enforcement will continue to focus on complex financial products, gatekeepers, financial reporting, market structure, private funds, and insider trading.
OUR TAKE: We expect this means that the staff will conduct specialized sweeps in these areas and enhance review during routine exams.