U . S . S E C U R I T I E S A N D 

EXCHANGE COMMISSION

2019

EXAMINATION PRIORITIES

Office of Compliance Inspections and Examinations
CONTENTS

Message from OCIE's Leadership Team................................................................................................................1

Promoting Compliance .......................................................................................................................2

Preventing Fraud.................................................................................................................................3

Identifying and Monitoring Risk ..........................................................................................................3

Informing Policy...................................................................................................................................4

The Coming Year.................................................................................................................................4

Introduction ...............................................................................................................................................................5

Retail Investors, Including Seniors and Those Saving for Retirement...............................................................6

Fees and Expenses: Disclosure of the Costs of Investing .................................................................6

Conflicts of Interest ...........................................................................................................................6

Senior Investors and Retirement Accounts and Products .................................................................7

Portfolio Management and Trading ....................................................................................................7

Never-Before or Not Recently-Examined Investment Advisers .........................................................7

Mutual Funds and Exchange Traded Funds.......................................................................................8

Municipal Advisors ..............................................................................................................................8

Broker-Dealers Entrusted with Customer Assets ...............................................................................8

Microcap Securities.............................................................................................................................8

Compliance and Risk in Registrants Responsible for Critical Market Infrastructure .......................................9

Clearing Agencies ...............................................................................................................................9

Entities Subject to Regulation Systems Compliance and Integrity ...................................................9

Transfer Agents .................................................................................................................................10

National Securities Exchanges .........................................................................................................10

Focus on FINRA and MSRB..................................................................................................................................10

Digital Assets...........................................................................................................................................................11

Cybersecurity ..........................................................................................................................................................11

Anti-Money Laundering Programs .......................................................................................................................11

Conclusion...............................................................................................................................................................12

Disclaimer

This document was prepared by SEC staff, and the views expressed herein are those of OCIE. 

The Commission has expressed no view on this document’s contents. It is not legal advice; it is not 

intended to, and does not, and may not be relied upon to create any rights, substantive or procedural, 

enforceable at law by any party in any matter civil or criminal.
2019 EXAMINATION PRIORITIES | 1

MESSAGE FROM OCIE’S LEADERSHIP TEAM

The Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange 

Commission (SEC) is pleased to announce its 2019 examination priorities.

With approximately 1,000 staff in the Commission’s 11 regional offices and headquarters, OCIE is 

responsible for overseeing more than 13,200 investment advisers, approximately 10,000 mutual funds 

and exchange traded funds, roughly 3,800 broker-dealers, about 330 transfer agents, 7 active clearing agencies, 21 national securities exchanges, nearly 600 municipal advisors, the Financial Industry 

Regulatory Authority (FINRA), the Municipal Securities Rulemaking Board (MSRB), the Securities 

Investor Protection Corporation, and the Public Company Accounting Oversight Board.

OCIE completed over 3,150 examinations in Fiscal Year (FY) 2018, 

which is a 10 percent increase over FY 2017. Coverage of investment advisers increased to approximately 17 percent of SEC-registered investment advisers, up from approximately 15 percent in 

2017. Examinations of investment companies were also up this year, 

increasing by approximately 45 percent. OCIE completed over 300 

examinations of broker-dealers and actively oversaw FINRA and 

other regulated entities.

The financial markets, products and services offered, and innovation in advanced technology continue 

to grow at a rapid pace. Operations of registered entities have also grown more complex, diverse, and 

interconnected, becoming more dependent on linkages to other organizations located throughout the 

world. In addition, the demands on OCIE’s resources continue to grow with continued increases in the 

number of firms, particularly investment advisers registered with the SEC.

Over the past year, the number of registered investment advisers grew by nearly 5 percent, while the 

amount of assets managed by these advisers increased to approximately $84 trillion. The complexity 

of these advisers also continues to grow: more than 3,700 advisers have over one billion dollars in 

assets under management; approximately 35 percent manage a private fund; more than 50 percent 

have custody of client assets; more than 60 percent are affiliated with other financial industry firms; 

and approximately 12 percent provide advisory services to a mutual fund, exchange traded fund, or 

other registered investment company. For the broker-dealer community, despite the overall number 

of registered broker-dealers decreasing slightly, there were over 100 firms newly registered last year. 

Overall, broker-dealers operate more than 156,000 branch offices and approximately 10 percent of all 

broker-dealers are dually-registered with the SEC as investment advisers.

In 2019, OCIE will continue to stay abreast of changes in the SEC’s registrant base, the markets, and 

investor needs and preferences, and will adjust its risk-based program in response to these changes. To 

this end, OCIE is increasingly leveraging technology and data analytics as well as human capital to 

fulfill its mission. This includes continually adding to and refining the expertise, tools, and applications 

that help identify areas of risk, firms that may present heightened risk of non-compliance, and activities 

that may harm investors.

DID YOU KNOW?

OCIE's work stands on four "pillars": 

promoting compliance, preventing 

fraud, identifying and monitoring risk, 

and informing policy.
2 | U.S. SECURITIES AND EXCHANGE COMMISSION

The SEC’s recently adopted Strategic Plan reiterated the importance of examinations. It described using 

examination resources to bolster regulatory requirements and protect investors as a “core principle” 

that the SEC has applied over the past 84 years to carry out its mission to protect investors, maintain 

fair, orderly, and efficient markets, and facilitate capital formation. The SEC’s Strategic Plan also is clear 

that future success requires the SEC to be efficient and nimble in the allocation of its resources. OCIE 

contributes to the fulfillment of the SEC’s Strategic Plan by putting its limited resources to their highest 

and best use and performing high-quality, effective, efficient, and risk-targeted exams.

The priorities provide a preview of key areas where OCIE intends to focus its limited resources, but 

they do not encompass all of the areas that will be covered in examinations. To ensure the effective 

and efficient allocation of examination resources, OCIE proactively engages with registrants through 

outreach events, including national and regional compliance seminars. In FY 2018, OCIE staff participated in or held more than 100 such industry and regulatory outreach events.

OCIE also believes in the importance of engaging with senior leadership and boards of directors at 

registered entities. These efforts provide insight into evolving markets, including changes in risks to the 

markets and investors, market dynamics, and investor preferences. They also provide an opportunity 

to discuss with industry participants mission-related regulatory and market-impacting developments. 

The information obtained is also shared across the SEC through intra-agency working groups. These 

efforts have helped OCIE develop its risk-based approach and execute its examinations more effectively. The input received at these outreach and monitoring efforts were incorporated into the selection 

of the 2019 priorities.

OCIE measures performance in multiple ways and always against the backdrop of its four pillars: 

promoting compliance, preventing fraud, identifying and monitoring risk, and informing policy. 

Through the over 3,150 examinations, joint initiatives, outreach events and other efforts in 2018, 

OCIE’s five program areas—Investment Adviser/Investment Company, Broker-Dealer and Exchanges, 

Clearance and Settlement (OCS), FINRA and Securities Industry Oversight, and the Technology 

Controls Program (TCP)—have advanced each pillar to the benefit of retail investors and the markets.

Promoting Compliance

• In response to the areas of concern and weaknesses identified in deficiency letters, firms often revised 

compliance policies and procedures, changed business practices, clarified a regulatory filing, or 

otherwise enhanced their disclosures.

• OCIE continued to prioritize transparency to investors, registrants, and the broader financial industry 

regarding its exam observations. Information about common compliance issues identified during 

examinations helps firms evaluate their own compliance policies and procedures and better identify 

weaknesses and areas for improvement. To foster transparency, OCIE has published the following 

five risk alerts since the publication of the 2018 priorities:

» Most Frequent Best Execution Issues Cited in Adviser Exams

» Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations 

of Investment Advisers

» Risk-Based Examination Initiatives Focused on Registered Investment Companies

» Investment Adviser Compliance Issues Related to the Cash Solicitation Rule

» Observations from Investment Adviser Examinations Relating to Electronic Messaging
2019 EXAMINATION PRIORITIES | 3

• TCP issued a first-of-its-kind letter summarizing select examination findings from FYs 2016 and 

2017 to entities subject to Regulation Systems Compliance and Integrity (Regulation SCI), a rule 

intended to help strengthen the technology infrastructure of 

the U.S. securities markets. The letter highlighted issues OCIE 

believes these entities would benefit from considering when 

assessing and improving cyber security, IT system resiliency, and 

technology-related policies and procedures.

• OCIE promoted compliance through thousands of investment 

adviser examinations as well as with staff discussions at the 

National Compliance Outreach Seminar for Investment Advisers 

and Investment Companies. At this outreach event, staff discussed a wide variety of topics, including 

program priorities, issues related to fees and expenses, portfolio management trends, cybersecurity, 

compliance, regulatory hot topics, and rulemaking.

• OCS promoted compliance during exams of Systemically Important Financial Market Utilities and 

other registered clearing agencies, identifying areas for improvement in governance, operational risk 

management, and public disclosure.

Preventing Fraud

• Examinations led to more than 160 enforcement referrals and resulted in firms returning more than 

$35 million to investors.

• OCIE conducted retail-targeted examinations of broker-dealers focused on preventing fraud, such 

as potential misappropriation and the sale of high risk securities by broker-dealers who may not 

conduct sufficient research into an investment and its appropriateness for a client.

• Examinations of investment advisers also aimed to prevent harm to retail investors, particularly 

seniors and those saving for retirement. For example, examinations identified advisers that selected 

or recommended more expensive mutual fund share classes for clients when lower cost share classes 

were available, and either failed to disclose or made inadequate disclosure about financial incentives 

they had to select or recommend the more expensive share classes. Examinations also identified 

compliance issues regarding advisory activities in branch offices, which resulted in enhancements to 

oversight practices.

Identifying and Monitoring Risk

• Examinations of firms required to comply with Regulation SCI, including the national securities 

exchanges, registered clearing agencies, FINRA, the MSRB, plan processors, and certain alternative 

trading systems (collectively, “SCI entities”) identified many issues that, if left unresolved, could 

increase the risk of systems compromise or disruption at SCI entities and, in turn, increase risks 

to investors and the markets. Among other issues, certain SCI entities had insufficient policies and 

procedures related to: data loss prevention; vendor risk management; inventory management; and 

timely, consistent, and effective implementation of vendor-issued security patches. In addition, certain 

firms failed to report system disruptions or outages in a timely manner. 

• Focused reviews of fixed income best execution obligations were conducted to identify and monitor 

risks, and examiners observed that many broker-dealers were not conducting sufficient reviews of 

execution quality to ensure that retail investors were receiving best execution.

DID YOU KNOW?

In FY 2018, OCIE completed over 

3,150 examinations—representing a 

10 percent increase over FY 2017.
4 | U.S. SECURITIES AND EXCHANGE COMMISSION

• Investment adviser examinations identified emerging risks at advisers selling or recommending digital 

assets, such as concerns related to custody and safekeeping of investor assets, valuation, omitted or 

misleading disclosures regarding the complexities of the products and technology, and the risks of 

dramatic price volatility.

Informing Policy

• Examinations helped inform policy by providing further insight to other SEC Divisions and Offices 

regarding how registered entities have implemented the SEC’s rules, the practical difficulties and 

challenges faced in complying with these rules, and common areas of non-compliance.

• Examinations into third party vendor management provided insight into, among other things, the 

use and management of cloud-based computing services.

• Examinations of compliance with the amended money market fund rules, disclosure relating to target 

fund glide path allocations, and fixed income cross trading practices provided valuable information 

about current practices in these areas.

The Coming Year

• In 2019, many of OCIE’s priorities have changed as new risks have emerged and existing risks have 

heightened or been mitigated. While priorities shift, OCIE’s commitment to the SEC’s mission and 

doing the utmost to protect investors and serve the American people will never change.

Peter B. Driscoll 

Director

Daniel S. Kahl

Co-Deputy Director, 

Chief Counsel

John S. Polise

National Broker Dealer 

and Exchange Director

Keith E. Cassidy

National Technology 

Controls Program 

Director

James R. Reese 

Chief Risk Officer

Kevin W. Goodman 

National FINRA and 

Securities Industry 

Oversight Director

Kristin A. Snyder 

Co-Deputy Director, 

National Investment 

Adviser/Investment 

Company Director

Daniel R. Gregus 

National Clearing 

Agency Director
2019 EXAMINATION PRIORITIES | 5

INTRODUCTION

In 2019, OCIE will prioritize certain practices, products, and services that it believes present potentially heightened risk to investors or the integrity of the U.S. capital markets. Designed to support the 

SEC’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital 

formation, the six themes for OCIE’s 2019 Examination Priorities, which include perennial risk areas 

and developing products and services, are:

1. Matters of importance to retail investors, including seniors and 

those saving for retirement;

2. Compliance and risk in registrants responsible for critical 

market infrastructure;

3. Select areas and programs of FINRA and MSRB;

4. Digital Assets;1

5. Cybersecurity; and

6. Anti-Money Laundering.

These priorities are not exhaustive and will not be the only issues OCIE addresses in its examinations, 

risk alerts, and investor and industry outreach. While the priorities drive many of OCIE’s examinations, the scope of any examination is determined through a risk-based approach that includes analysis 

of the registrant’s operations, products offered, and other factors. This risk-based approach often 

results in examinations that address key aspects of the SEC’s regulatory oversight, such as the disclosure of services, fees, expenses, conflicts of interest for investment advisers, and trading and execution 

quality issues for broker-dealers.

OCIE’s risk-based approach, both in selecting registered entities to examine and determining the scope 

of risk areas to examine, remains flexible in order to cover emerging and exigent risks to investors and 

the marketplace as they arise. OCIE is continually evaluating changes in market conditions, industry 

practices, and investor preferences to assess risks to both investors and the markets.

Although change may be continual, OCIE’s analytic efforts and examinations remain firmly grounded 

in its four pillars: promoting compliance, preventing fraud, identifying and monitoring risk, and 

informing policy.

1 Digital Assets include cryptocurrencies, coins, and tokens.

DID YOU KNOW?

In FY 2018, OCIE achieved examination 

coverage of approximately 17 percent 

of registered investment advisers, up 

from 9 percent just five years ago.
6 | U.S. SECURITIES AND EXCHANGE COMMISSION

RETAIL INVESTORS, INCLUDING SENIORS AND THOSE 

SAVING FOR RETIREMENT

OCIE prioritizes the protection of retail investors, particularly seniors and those saving for retirement, 

and pursues examinations of firms that provide products and services to these investors. 

In furtherance of OCIE’s commitment to retail investors, examinations will focus on the following areas:

Fees and Expenses: Disclosure of the Costs of Investing

Every dollar an investor pays in fees and expenses is a dollar not 

invested. It is critically important that investors are provided with 

proper disclosures of the fees and expenses they pay for products 

and services and that financial professionals accurately calculate 

and charge fees in accordance with these disclosures. OCIE will 

continue to review fees charged to advisory accounts, ensuring that 

the fees are assessed in accordance with the client agreements and 

firm disclosures.

For these examinations, OCIE will select firms with practices or business models that may create 

increased risks of inadequately disclosed fees, expenses, or other charges. With respect to mutual fund 

share classes, OCIE will continue to evaluate financial incentives for financial professionals that may 

influence their selection of particular share classes. In addition, OCIE remains focused on investment 

advisers participating in wrap fee programs, which charge investors a single bundled fee for both 

advisory and brokerage services. Continued areas of interest include the adequacy of disclosures and 

brokerage practices.

Conflicts of Interest

As fiduciaries, investment advisers have a duty to act and provide advice in the best interests of their 

clients. Ensuring that investment advisers are acting in a manner consistent with their fiduciary duty 

and meeting their contractual obligations to their clients is paramount to maintaining investor confidence in the markets and investment professionals.

Conflicts of interest provide incentives for financial professionals to recommend certain types of 

products and services. Examinations will review policies and procedures addressing the following:

Use of Affiliated Service Providers and Products: Advisers in some cases utilize services or 

products provided by affiliated entities. These arrangements present conflicts of interest 

related to, among other areas, portfolio management practices and compensation arrangements. OCIE will examine such arrangements, focusing on the impact to clients and the 

related disclosures of conflicts of interest that may be present.

DID YOU KNOW?

In FY 2018, OCIE held a national investment adviser/investment company compliance outreach program, 

a compliance outreach program for 

municipal advisors, and participated 

in more than a hundred other outreach events in order to promote and 

improve industry compliance.
2019 EXAMINATION PRIORITIES | 7

Securities-Backed Non-Purpose Loans and Lines of Credit: A non-purpose loan or line of credit 

allows borrowers to use the securities in their brokerage or advisory accounts as collateral to 

obtain a loan, the proceeds of which cannot be used for purchasing or trading securities. OCIE 

has observed that advisers, broker-dealers, and their employees receive certain financial incentives to recommend these products to clients and/or customers. OCIE will assess this practice 

to determine whether registrants are, among other things, adequately disclosing the risks to 

clients and any conflicts of interest presented by recommending these loans.2

Borrowing Funds from Clients: Borrowing funds from clients presents a number of conflicts of 

interest for an investment adviser. Where examiners observe this practice, emphasis will be on 

whether adequate disclosures, including the potentially poor or failing financial condition of 

the investment adviser, are made to the client and the investment adviser has acted consistently 

with these disclosures.

Senior Investors and Retirement Accounts and Products

OCIE will conduct examinations that review how broker-dealers oversee their interactions with senior 

investors, including their ability to identify financial exploitation of seniors. In examinations of investment advisers, OCIE will continue to review the services and products offered to seniors and those 

saving for retirement. These examinations will focus on, among other things, compliance programs of 

investment advisers, the appropriateness of certain investment recommendations to seniors, and the 

supervision by firms of their employees and independent representatives.

Portfolio Management and Trading

Reviewing portfolio management processes is an integral component to investment adviser examinations. OCIE will review firms’ practices for executing investment transactions on behalf of clients, 

fairly allocating investment opportunities among clients, ensuring consistency of investments with the 

objectives obtained from clients, disclosing critical information to clients, and complying with other 

legal restrictions.

OCIE will also examine investment adviser portfolio recommendations to assess, among other things, 

whether investment or trading strategies of advisers are: (1) suitable for and in the best interests of 

investors based on their investment objectives and risk tolerance; (2) contrary to, or have drifted from, 

disclosures to investors; (3) venturing into new, risky investments or products without adequate risk 

disclosure; and (4) appropriately monitored for attendant risks.

Never-Before or Not Recently-Examined Investment Advisers

OCIE will continue to conduct risk-based examinations of certain investment advisers that have never 

been examined, including newly-registered investment advisers as well as those registered for several 

years but that have yet to be examined. OCIE will also prioritize examinations of certain investment 

advisers that have not been examined for a number of years and may have substantially grown or 

changed business models.

2 See Investor Alert: Securities-Backed Lines of Credit, issued by the SEC’s Office of Investor Education and 

Advocacy and FINRA, available at https://www.sec.gov/oiea/investor-alerts-bulletins/sbloc.html.
8 | U.S. SECURITIES AND EXCHANGE COMMISSION

Mutual Funds and Exchange Traded Funds

Mutual funds and exchange traded funds (ETFs) are the primary investment vehicles for many retail 

investors. OCIE will continue to prioritize examinations of these funds, the activities of their advisers, 

and oversight practices of their boards of directors. Examinations will assess industry practices and 

regulatory compliance in various areas that may have significant impact on retail investors.

OCIE will focus on risks associated with the following: (1) index funds that track custom-built or 

bespoke indexes; (2) ETFs with little secondary market trading volume and smaller assets under 

management; (3) funds with higher allocations to certain securitized assets; (4) funds with aberrational 

underperformance relative to their peer groups; (5) funds managed by advisers that are relatively new 

to managing Registered Investment Companies (RICs); and (6) advisers that provide advice to both 

RICs and private funds with similar investment strategies.

Municipal Advisors

Municipal advisors (MAs) provide advice to, or on behalf of, a municipal entity with respect to the 

issuance of municipal securities or municipal financial products. OCIE will continue to conduct select 

examinations of MAs that have never been examined, concentrating on whether these MAs have 

satisfied their registration requirements and professional qualifications as well as continuing education 

requirements. OCIE will also prioritize whether MAs provided the appropriate disclosures regarding 

their conflicts of interests or otherwise violated their fiduciary duty to a municipal entity. Examinations 

will also review for compliance with recently-effective MSRB rules, 

including those relating to advertisements by MAs and the standards 

of conduct for MAs obtaining CUSIP numbers on behalf of issuers.

Broker-Dealers Entrusted with Customer Assets 

Broker-dealers that hold customer cash and securities must abide 

by certain rules, including the Customer Protection Rule (Exchange 

Act Rule 15c3-3), and have a significant responsibility to ensure that 

those assets are safeguarded and accurately reported. The Customer 

Protection Rule restricts the use of customer assets and prevents the 

broker-dealer from using customer assets as working capital. Examinations of select broker-dealers will 

focus on compliance with this rule, as well as procedures and controls to promote compliance.

Microcap Securities

OCIE will continue examinations of broker-dealers involved in selling stocks of companies with a 

market capitalization of under $250 million. OCIE will look at a variety of areas, including reviewing 

for manipulative schemes (i.e., pump and dump schemes), compliance with Regulation SHO, which 

governs short sales, and compliance with Exchange Act Rule 15c2-11, which governs the submission 

and publication of quotations by broker-dealers for certain over-the-counter equity securities.

DID YOU KNOW?

Broker-dealers operate more than 

156,000 branch offices, and approximately 10 percent of all brokerdealers are dually registered with 

the SEC as investment advisers.
2019 EXAMINATION PRIORITIES | 9

COMPLIANCE AND RISK IN REGISTRANTS RESPONSIBLE 

FOR CRITICAL MARKET INFRASTRUCTURE

Clearing Agencies

Clearing agencies promote market stability and efficiency and help to reduce risk by performing critical 

post trade services, including acting as intermediaries between and guarantors for buyers and sellers 

of securities, facilitating the settlement of investor trades, and acting as a depository for securities and 

other financial instruments. For example, clearing agencies may reconcile 

transaction information received from the parties to a trade, calculate 

settlement obligations, or hold securities as certificates or in electronic 

form to facilitate automated settlement. As a result, clearing agencies help 

ensure that trades settle on time and at the agreed upon terms.

OCIE will continue to conduct annual examinations of clearing agencies 

that the Financial Stability Oversight Council has designated as systemically important and for which, under the Dodd- Frank Act, the Commission is the supervisory agency. OCIE will also conduct risk-based examinations of other registered 

clearing agencies. Examinations will focus on: (1) compliance with the SEC’s Standards for Covered 

Clearing Agencies and other federal securities laws applicable to registered clearing agencies; 

(2) whether clearing agencies have taken timely corrective action in response to prior examinations; 

and (3) other areas identified in collaboration with the SEC’s Division of Trading and Markets and 

with other regulators.

Entities Subject to Regulation Systems Compliance and Integrity

Regulation SCI was adopted by the Commission to strengthen the technology infrastructure of the

U.S. securities markets. Among other things, it requires SCI entities to establish, maintain, and enforce 

policies and procedures designed to ensure that their systems’ capacity, integrity, resiliency, availability, 

and security are adequate to maintain their operational capability and promote the maintenance of fair 

and orderly markets. If certain events occur, these entities are required to take corrective action as soon 

as reasonably practical and immediately notify the SEC of the occurrence.

OCIE will continue to examine SCI entities to evaluate whether they have effectively implemented 

written policies and procedures required by Regulation SCI. OCIE will also focus on, among other 

things, controls relating to software development life cycles and related governance procedures, effectiveness of internal audit programs, inventory management, and threat management capabilities.

DID YOU KNOW?

Clearing agencies perform a 

variety of services that help 

ensure trades settle on time and 

at the agreed upon terms.
10 | U.S. SECURITIES AND EXCHANGE COMMISSION

Transfer Agents

Transfer agents serve as agents for securities issuers and play a critical role in the settlement of securities transactions. Among their key functions, transfer agents are responsible for maintaining issuers’ 

securityholder records, recording changes of ownership, canceling and issuing certificates, distributing 

dividends and other payments to securityholders, and facilitating communications between issuers and 

securityholders. Efficient transfer agent operations are critical to secondary securities markets and for 

recordkeeping during primary market activities. Examinations will assess transfers, recordkeeping, and 

the safeguarding of funds and securities. Examinations will also focus on the requirement for transfer 

agents to annually file a report by an independent accountant concerning the transfer agency’s system 

of internal accounting controls.

Examination candidates will include transfer agents that serve as paying agents for issuers, transfer 

agents developing blockchain technology, or transfer agents that provide services to issuers of microcap 

securities, private offerings, crowdfunded securities, or digital assets.

National Securities Exchanges

With over 20 national securities exchanges facilitating transactions in the marketplace, OCIE will 

examine internal audit and surveillance programs and funding for regulatory programs.

FOCUS ON FINRA AND MSRB

FINRA

FINRA is a registered national securities association that adopts and enforces rules governing the 

conduct of its members. These members are also registered with the SEC as broker-dealers. FINRA 

oversees approximately 3,800 brokerage firms, 156,000 branch offices, and 630,000 registered 

representatives through examinations, enforcement, and surveillance. In addition, FINRA, among other 

things, provides a forum for securities arbitration and mediation, 

conducts market regulation, including by contract for a majority 

of national securities exchanges, reviews broker-dealer advertisements, administers the testing and licensing of registered persons, 

and operates industry utilities such as Trade Reporting Facilities. 

Examinations of FINRA will continue to focus on FINRA’s 

operations and regulatory programs and the quality of FINRA’s 

examinations of broker-dealers and municipal advisors that are 

also registered as broker-dealers.

MSRB

MSRB regulates the activities of broker-dealers that buy, sell, and underwrite municipal securities, and 

municipal advisors. MSRB establishes rules for municipal securities dealers and municipal advisors, 

supports market transparency by making municipal securities trade data and disclosure documents 

available, and conducts education and outreach regarding the municipal securities market. OCIE, 

in coordination with FINRA, conducts examinations of MSRB members to ensure compliance with 

MSRB rules. Given MSRB’s broad responsibility to regulate municipal securities transactions, OCIE 

will continue to conduct inspections of MSRB to evaluate the effectiveness of MSRB’s policies, procedures, and controls.

DID YOU KNOW?

FINRA oversees approximately 

3,800 brokerage firms, 156,000 

branch offices, and 630,000 registered 

representatives through examinations, 

enforcement, and surveillance.
2019 EXAMINATION PRIORITIES | 11

DIGITAL ASSETS

The digital asset market has grown rapidly and may present risks to retail investors. The number of 

digital asset market participants, including broker-dealers, trading platforms, and investment advisers, also continues to increase. Given the significant growth and risks presented in this market, OCIE 

will continue to monitor the offer and sale, trading, and management of digital assets, and where the 

products are securities, examine for regulatory compliance. In particular, through high level inquiries, 

OCIE will take steps to identify market participants offering, selling, trading, and managing these 

products or considering or actively seeking to offer these products and then assess the extent of their 

activities. For firms actively engaged in the digital asset market, OCIE will conduct examinations 

focused on, among other things, portfolio management of digital assets, trading, safety of client funds 

and assets, pricing of client portfolios, compliance, and internal controls.

CYBERSECURITY

Cybersecurity protection is critical to the operation of the financial markets. The impact of a successful cyber-attack may have consequences that extend beyond the firm compromised to other market 

participants and retail investors, who may not be well informed of these risks and consequences. OCIE 

is working with firms to identify and manage cybersecurity risks and to encourage market participants 

to actively and effectively engage in this effort.

OCIE will continue to prioritize cybersecurity in each of its five examination programs. Examinations 

will focus on, among other things, proper configuration of network storage devices, information 

security governance generally, and policies and procedures related to retail trading information security. 

Specific to investment advisers, OCIE will emphasize cybersecurity practices at investment advisers with 

multiple branch offices, including those that have recently merged with other investment advisers, and 

continue to focus on, among other areas, governance and risk assessment, access rights and controls, 

data loss prevention, vendor management, training, and incident response.

ANTI-MONEY LAUNDERING PROGRAMS

The Bank Secrecy Act requires broker-dealers to establish anti-money laundering (AML) programs.

These programs must, among other things, include policies and procedures reasonably designed 

to identify customers, perform customer due diligence, monitor for suspicious activity, and where 

appropriate, file suspicious activity reports (SARs) with the Financial Crimes Enforcement Network. 

SARs are used to detect and combat terrorist financing, public corruption, market manipulation, and a 

variety of other fraudulent behavior.
12 | U.S. SECURITIES AND EXCHANGE COMMISSION

In 2019, OCIE will continue to prioritize examining broker-dealers for compliance with their AML 

obligations, including whether they are meeting their SAR filing obligations, implementing all elements 

of their AML program, and robustly and timely conducting independent tests of their AML program. 

The goal of these examinations is to ensure that broker-dealers have policies and procedures in place 

that are reasonably designed to identify suspicious activity and illegal money laundering activities.

CONCLUSION

These priorities reflect OCIE’s assessment of certain risks, issues, and policy matters arising from 

market and regulatory developments, information gathered from examinations, and other sources, 

including tips, complaints, and referrals, and coordination with other regulators. OCIE welcomes 

comments and suggestions regarding how it can better fulfill its mission to promote compliance, 

prevent fraud, identify and monitor risk, and inform SEC policy. OCIE’s contact information is 

available at https://www.sec.gov/ocie/ocie_org.htm. If you suspect or observe activity that may 

violate the federal securities laws or otherwise operates to harm investors, please notify SEC staff 

at https://www.sec.gov/tcr.

U.S. Securities and 

Exchange Commission

100 F Street NE

Washington, DC 20549

SEC.gov