OCIE 2020 Examination Priorities Released

OCIE has announced its 2020 exam priorities as part of its risk-based approach to protecting investors. As in the past, key risk areas that are prioritized impacting SROs, clearing firms, investment advisers and other market participants include:

  • Retail Investors, Including Seniors and Those Saving for Retirement
  • Market Infrastructure related to capital markets, including clearing agencies, national securities exchanges, alternative trading systems and transfer agents
  • Cyber and information security risks
  • Examining RIAs, including investment companies, ETFs, private funds that have never been examined, including new RIAs and RIAs never examined and oversight practices of their boards of directors
  • AML requirements
    Fintech and innovation, including digital assets and electronic advice
  • Oversight of FINRA and MSRB operations, programs and their examinations of broker-dealers and municipal advisors

OCIE makes clear that the above risk areas is not exhaustive and will be dependent on risk-based approaches employed by OCIE and its staff. A copy of the 2020 exam priorities can be found here.

SEC Issues New Alert on Political Contributions

Political contributions continue to be a primary source of concern for regulators like the SEC and the Municipal Securities Rulemaking Board…….

The SEC has recently issued another Risk Alert concerning Municipal Securities Rulemaking Board’s Rule G-37,  a rule that limits political contributions by municipal securities professionals to campaigns of public officials of issuers whom they do or seek to do business.  Typically, the illegal practice, known as “pay-to-play, involves public officials granting public contracts to their campaign contributors, or contractors, by attempting to influence the award of a contract, making contributions to an official who can influence the contracting process.

In issuing the alert, the SEC’s Office of Compliance Inspections and Examination noted the Commission’s concern with certain practices its examiners in the field have observed that may crossed the line violating the rule.   These so-called “pay to play”practices include:

  • firms that may have engaged in municipal securities business with issuers within two years of  making contributions (other than  de minimis contributions) to officials of the issuer.
  • firms that may not have maintained accurate and complete lists of their municipal financial professionals (MFPs) and non-MFP professional executive officers as required by MSRB Rule G-8.

  • firms that may have failed to file accurate and complete Form G-37s, by  identifiying on the form all municipal securities business that a firm has  engaged or all political contributions made to issuer officials by MFP and non-MFP executive officers.

  • firms that may have failed to create or implement supervisory procedures adequate enough to comply with Rules G-37 and G-38.

In addition to addressing the above issues, for some investment advisers this will mean taking steps to review political contribution reports related to any government client, reviewing any pattern of contributions by certain employee or group of employees, and other relevant factors.  In addition,  any review should  include any known external information, such as public contribution reports required by the MSRB, state and local law in relevant jurisdictions.