SEC Examined 16% of Advisers and Referred 6% to Enforcement in 2021
The SEC’s Division of Examinations reviewed 16% of registered investment advisers in fiscal 2021 and, overall, about 70% of examined registrants received a deficiency letter and 6% of those examined were referred to the Enforcement Division, according to its recently published 2022 Examinations Priorities letter.
The Examinations Division will focus its 2022 resources on private funds (which comprise 35% of the industry), ESG investing, Regulation Best Interest and fiduciary duty, cybersecurity, fintech, and crypto. In addition to the longstanding priorities such as conflicts of interest, fees, and disclosure, the Examinations Division will assess whether firms are allocating sufficient resources to compliance, how private fund firms charge management fees, whether ESG firms invest assets as disclosed, how dual registrants determine the type of account recommended for retail clients, and the technologies underlying digital asset platforms. The letter, which includes an annual report of the Division’s activities, also reports that the SEC reviewed 125 investment company complexes, a small percentage of the more than 9,000 registered funds.
Compli-pros should share this 26-page tome with their bosses to press their cases about why they need more resources. Now in its 10th iteration, the annual priorities letter just adds more priorities every year.
Read Exam Priorities letter here.