SEC Office of Compliance Inspections and Examinations Sets Sights on Fintech in 2020

Chris Gaetano
Published Date:
Jan 8, 2020
The Securities and Exchange Commission's Office of Compliance Inspections and Examinations (OCIE) has added technologies increasingly used in the financial sector, or fintech, to its list of priorities in 2020. The OCIE said it intends to look at how firms are using new technologies and data analytics to interact with and provide services for investors, firms and other service providers, as well as look at the effectiveness of current compliance and control functions.

Of particular interest to the OCIE are digital assets such as cryptocurrencies, and electronic investment advice, often referred to as "robot-advisers."

With regard to digital assets, OCIE said it will be looking specifically at investment suitability; portfolio management and trading practices; safety of client funds and assets; pricing and valuation; effectiveness of compliance programs and controls; and supervision of employee outside business activities. 
With regard to electronic investment advice, the OCIE is interested in SEC registration eligibility; cybersecurity policies and procedures; marketing practices; adherence to fiduciary duty, including adequacy of disclosures; and effectiveness of compliance programs.

The OCIE's other points of emphasis for 2020 are largely the same perennial risk areas that it has focused on in previous years: 

* Retail investors, including seniors and those saving for retirement; 

* Market infrastructure; 

* Information security; 

* Focus areas relating to investment advisers, investment companies, broker-dealers, and municipal advisers; 

* Anti-money laundering programs; 

* The Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB). 

The published priorities for fiscal year 2020 are not exhaustive and will not be the only areas OCIE focuses on in its examinations, risk alerts, and investor and industry outreach. While the priorities drive OCIE’s examinations, the scope of any examination is determined through a risk-based approach that includes analysis of a given entity’s history, operations, services, products offered, and other risk factors.

“As markets evolve, so do risks and potential harm to investors," said OCIE Director Pete Driscoll. "OCIE continually works to adjust its examination focus areas to target these risks and publishes its annual priorities to communicate where we see the potential for increased risk and related harm. We hope that this transparency helps firms evaluate and improve their compliance programs, which ultimately helps protect investors.”

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