2023

EXAMINATION PRIORITIES

Division of Examinations

U.S. Securities and 

Exchange Commission

DISCLAIMER: This statement represents the views of the staff of the Division of Examinations. It is not a rule, regulation, 

or statement of the U.S. Securities and Exchange Commission (SEC or Commission). The Commission has neither approved 

nor disapproved its content. This statement, like all staff statements, has no legal force or effect: it does not alter or amend 

applicable law, and it creates no new or additional obligations for any person.

CONTENTS

MESSAGE FROM THE LEADERSHIP TEAM .......................................................................................................................1

DIVISION OF EXAMINATIONS – 2023 EXAMINATION PRIORITIES.....................................................................9

I. Notable New and Significant Focus Areas........................................................................................... 9

A. Compliance with Recently Adopted Rules Under the Investment Advisers 

Act of 1940 and Investment Company Act of 1940................................................................... 9

B. Registered Investment Advisers to Private Funds.....................................................................10

C. Standards of Conduct: Regulation Best Interest, Fiduciary Duty, and Form CRS..........11

1. Regulation Best Interest and Fiduciary Duty............................................................................11

2. Form CRS..............................................................................................................................................13

D. Environmental, Social, and Governance Investing .....................................................................13

II. Information Security and Operational Resiliency.............................................................................13

III. Crypto Assets and Emerging Financial Technology........................................................................14

IV. Investment Advisers and Investment Companies ............................................................................16

A. Focus Areas for Examinations of Registered Investment Advisers ....................................16

B. Focus Areas for Registered Investment Companies, Including 

Mutual Funds and ETFs........................................................................................................................16

V. Broker-Dealer and Exchange Examination Program.......................................................................17

A. Broker-Dealers.........................................................................................................................................17

B. National Securities Exchanges ..........................................................................................................18

C. Security-Based Swap Dealers............................................................................................................19

D. Municipal Advisors .................................................................................................................................19

E. Transfer Agents .......................................................................................................................................19

VI. Clearance and Settlement ........................................................................................................................20

VII. Regulation Systems Compliance and Integrity ................................................................................. 21

VIII. Financial Industry Regulatory Authority (FINRA) and 

Municipal Securities Rulemaking Board (MSRB) ............................................................................. 22

IX. Anti-Money Laundering............................................................................................................................. 23

X. The London Interbank Offered Rate Transition................................................................................ 23

XI. Conclusion ......................................................................................................................................................24

2023 EXAMINATION PRIORITIES | 1

MESSAGE FROM THE LEADERSHIP TEAM

The last several years have been marked by a great deal of tumult and change. Our 

markets and investors have faced pandemic, geopolitical instability, inflation and 

widespread cyber threats. Throughout these challenges, the Division of Examinations 

(Division or EXAMS) has continued to monitor the U.S. capital markets and engage with 

market participants who make those markets the strongest and most innovative in the 

world. As the world and our markets have evolved and adapted, so too has the Division. 

We continue to move forward by adjusting to the new realities of the environment, guided 

by a new leadership team, dedicated EXAMS staff and the lodestar of our long-standing 

mission, our “four pillars”: (1) promote compliance; (2) prevent fraud; (3) monitor risk; 

and (4) inform policy. 

Last year, as in prior years, the tremendously talented and experienced staff in EXAMS 

achieved remarkable success despite ever-increasing responsibilities and the headwinds that 

have emerged in recent years. Together, we successfully continued to advance a number 

of focused examinations—using our risk-based process to identify both firms and scope 

areas—to improve industry risk management practices and compliance with the federal 

securities laws. 

While carrying out our planned targeted examinations, we also responded to emerging 

events that posed significant risks to investors and the markets. These events included 

continued market volatility, cyber-events, and market disruptions caused by recent 

bankruptcies and financial distress among crypto asset market participants. We also 

conducted hundreds of outreach events and engagements—many in-person—with 

investors, industry, and securities regulators, and published seven risk alerts to help inform 

regulated entities and investors of common compliance issues observed in our exams. 

In addition to these and many other achievements, in fiscal year 2022, we examined 

approximately 15% of the registered investment adviser population. This was achieved 

despite continued growth in the registrant population to more than 15,000 investment 

advisers overseeing more than $125 trillion in assets under management. Going forward, 

as the industry continues to grow and change, we believe increased examinations can 

only be achieved with significant investments in human capital and technology resources, 

as noted in our fiscal year 2021 priorities. With respect to broker-dealers, the Division 

completed over 360 examinations, and, together with FINRA, we examined nearly half of 

the approximately 3,500 registered broker-dealers in fiscal year 2022.
2 | U.S. SECURITIES AND EXCHANGE COMMISSION

PROMOTE COMPLIANCE 

An important component of carrying out our four-part mission is recognizing and 

supporting compliance functions at our regulated entities. We recognize that the 

compliance and risk management functions at many firms are important resources that can 

support their missions, and in turn, benefit the market and investors generally. EXAMS’ 

mission and robust compliance programs go hand-in-hand. Guided by this principle, 

EXAMS will continue to support and empower regulated entities’ compliance functions to 

comply with federal securities laws through communication and transparency concerning 

our examination priorities and findings. An important way we try to achieve this 

empowerment is by communicating with the compliance community about the deficiencies 

we observe during examinations in a synthesized and anonymized form through risk 

alerts, compliance outreach, and with our Annual Priorities. This allows us to share key 

observations from our examinations with regulated entities outside the context of an 

examination so that firms can proactively assess whether any changes need to be made to 

improve or enhance their respective compliance programs. 

Risk Alerts 

Our risk alerts are an important tool to communicate with firms and help promote 

compliance. In 2022, we published seven risk alerts. These include one that provides 

observations from examinations relating to digital assets and areas of focus for future 

examinations in that space, as well as others that discuss common compliance topics 

identified in investment adviser and municipal advisor examinations. We have also 

published risk alerts to announce our focused examinations and to separately announce 

the results of such examinations, including our multi-branch office examination initiative, 

as well as our observations from a series of mutual fund and ETF examinations that 

assessed industry practices and regulatory compliance in certain areas that may have an 

impact on retail investors. 
2023 EXAMINATION PRIORITIES | 3

Compliance Outreach Program 

We promote compliance through a multi-level compliance outreach program, which is 

instrumental in messaging important observations from our examinations. We do so by 

striving to support and improve compliance functions and inform market participants 

through external engagements with investors and investor groups, industry, and our 

domestic and foreign regulatory partners. In 2022, EXAMS staff conducted or participated 

in hundreds of national and regional compliance outreach conferences and events to 

promote transparent communication and coordination among industry participants, 

investors, and regulators. 

Our regional offices play a crucial role in the success of EXAMS’ compliance program 

by collaborating with other regulators, as well as industry and professional associations 

within their respective regions, in conducting and participating in various outreach 

initiatives and events. For example, in October 2021, our Denver regional office led 

the Rocky Mountain Securities Conference where SEC leaders, the financial industry, 

and securities bar discussed issues impacting regulated entities, including investment 

advisers, investment companies, and broker-dealers. Additionally, during 2022, many 

of our other regional offices, including offices located in Boston, Chicago, New York, 

and San Francisco, held outreach events with industry, investor and affinity groups, 

such as teachers and members of the military, as well as targeted exams and enterprise 

risk management meetings. For example, EXAMS staff in our San Francisco regional 

office continued its multi-year teachers outreach initiative by hosting a virtual retirement 

investment summit that included other regulators, the industry, and investor groups. 

Annual Priorities

The development of our annual examination priorities is an iterative process that involves 

significant input from stakeholders within and outside of the Commission. EXAMS staff, in 

collaboration with our colleagues in other Commission divisions and offices, work side-byside to analyze and perform a risk-based assessment of a voluminous amount of information 

from a number of sources to develop our annual priorities. This includes information 

gathered through examinations, communications with other regulators, comments and tips 

received from investors and regulated entities, and industry publications. Additionally, this 

year, we reached out directly to representatives of state securities regulators and investor 

groups to gain additional feedback and viewpoints on critical investor protection issues 

to consider in developing this year’s examination priorities. Going forward, we expect to 

continue to take innovative approaches to enhance how we identify potential risks and 

examination areas of focus important to investors and market participants. 
4 | U.S. SECURITIES AND EXCHANGE COMMISSION

PREVENT FRAUD

Preventing fraud is a critical goal of EXAMS. EXAMS continues to enhance our ability 

to uncover fraud and suspicious activity by refining risk-based targeting methodologies 

to assess and monitor risk, which allows us to better allocate limited resources more 

effectively and focus them on areas and entities that pose the greatest risk to investors and 

market stability. To be more effective in identifying and preventing fraud, EXAMS utilizes 

and continues to broaden our in-house expertise and capacity through the development 

of specialized working groups in key areas. Currently, EXAMS has specialized working 

groups in a diverse portfolio of areas, including technology, equity markets and trading 

practices, fixed income and new products, investment companies, marketing and sales 

practices, private funds, transfer agents, and valuation matters. These specialized 

groups have been and continue to be an invaluable resource to our examiners and our 

examinations, providing subject matter expertise in their respective areas. 

In fiscal year 2022, firms returned more than $50 million to investors in response to 

EXAMS’ proactive work on examinations. EXAMS also made numerous referrals 

to Enforcement and we anticipate there may be additional referrals from our 2022 

examinations. Notable examples of enforcement actions that have involved EXAMS 

referrals include: the SEC’s first action alleging violations of Regulation Best Interest and 

the first action involving a broker-dealer for allegedly violating the municipal advisor 

registration rule; settled actions involving registered investment advisers and broker-dealers 

for deficiencies in programs to prevent customer identity theft under Regulation S-ID; and 

several settled actions involving advisers to private funds for custody rule violations under 

the Investment Advisers Act of 1940. 

MONITOR RISK

The use of risk-based strategies and technology are critical underpinnings for EXAMS. 

Our risk-based approach, both in selecting regulated 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. Going forward, we will continue to 

evaluate changes in market conditions, industry practices, and investor preferences to 

assess risks to both investors and the markets. 
2023 EXAMINATION PRIORITIES | 5

EXAMS also leverages technology to collect and analyze large sets of data to help identify 

risk and better understand a regulated entity’s business during examinations. During 2022, 

we leveraged this technology to better identify examination candidates and focus areas, 

such as our targeted examinations assessing how dual and affiliated investment advisers 

and broker-dealers, and their financial professionals, are meeting their obligations to act 

in the best interest of retail investors. As 2023 unfolds, we will continue to leverage data 

analysis to monitor and identify potentially problematic activities, as well as to determine 

how best to scope examinations of those activities and firms. We are also endeavoring to 

coordinate more closely with our foreign counterparts with the intended goal of enhancing 

oversight of our regulated entities from a global perspective. 

INFORM POLICY

While informing policy is always a critical pillar, it has been even more important over 

the past few years. EXAMS provides an invaluable perspective on the industry, our 

regulated entities, and the impact of existing rules on regulated entities. Last year, EXAMS 

continued to share input with our colleagues in the policy divisions by participating on 

numerous working groups. EXAMS also provided useful information and observations 

from examinations to the policy divisions for a number of other purposes. For example, 

EXAMS staff highlighted instances in which, based on observations in examinations, 

regulated entities may have misinterpreted rules.

LOOKING AHEAD

Looking ahead in 2023, EXAMS will continue our unwavering commitment to effectively 

carry out examinations to protect investors and to support and empower the staff at 

regulated entities to better ensure strong compliance cultures are interwoven in the fabric 

of regulated entities. Our four pillars will continue to serve as historical and forwardlooking guideposts informing how we continue to strengthen our examination program. 

We also expect to increase our on-site interactions with regulated entities while continuing 

to leverage remote examinations where it makes sense to do so. Simply put, we look 

forward to building on the many accomplishments from last year in 2023 and beyond 

while continuing to confront many of the same economic, geopolitical, and technological 

challenges that we successfully met in the past. 
6 | U.S. SECURITIES AND EXCHANGE COMMISSION

We hope the publication of our fiscal 2023 examination priorities proves valuable in our 

efforts to promote compliance and protect investors. Please also know that we are always 

interested in hearing more about new and emerging risk areas and products as well as how 

EXAMS can be more effective in our mission. Our contact information can be found at: 

https://www.sec.gov/contact-information/sec-directory. 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.

Richard R. Best

Director

Marshall M. Gandy

National Investment 

Adviser/Investment 

Company Program 

Director

Natasha Vij Greiner

Deputy Director and 

National Investment 

Adviser/Investment 

Company Program 

Director

Kevin W. Goodman

National FINRA and 

Securities Industry 

Oversight Program 

Director

Keith E. Cassidy

Deputy Director and 

National Technology 

Controls Program 

Director

John S. Polise

National BrokerDealer and Exchange 

Program Director

Allison M. Fakhoury

National Clearance 

and Settlement 

Examination Program 

Director
2023

EXAMINATION 

PRIORITIES

Division of Examinations

2023 EXAMINATION PRIORITIES | 9

The Division of Examinations prioritizes examinations of certain practices, products, and 

services that it believes present potentially heightened risks to investors or the integrity 

of the U.S. capital markets. This year’s examinations will prioritize several significant 

focus areas that pose unique or emerging risks to investors or the markets, as well as 

examinations of core and perennial risk areas. 

I. NOTABLE NEW AND SIGNIFICANT FOCUS AREAS

A. Compliance with Recently Adopted Rules Under the Investment Advisers 

Act of 1940 (Advisers Act) and Investment Company Act of 1940 (Investment 

Company Act)

The Commission recently adopted several significant new rulemakings as part of its efforts 

to drive efficiency in the capital markets and modernize SEC rules for the current economy 

and technologies. The Division is prioritizing examining for compliance with these recently 

adopted rules:

Advisers Act Rule 206(4)-1 (Marketing Rule). The new Marketing Rule is a significant 

change to a core examination review area for registered investment advisers (RIAs). As 

such, the Division will, among other things, assess whether RIAs have adopted and 

implemented written policies and procedures that are reasonably designed to prevent 

violations by the advisers and their supervised persons of the Marketing Rule. The 

Division will also review whether RIAs have complied with the substantive requirements 

of the Marketing Rule, including the requirement that RIAs have a reasonable basis for 

believing they will be able to substantiate material statements of fact and requirements for 

performance advertising, testimonials, endorsements and third-party ratings. 

Investment Company Act Rule 18f-4 (Derivatives Rule).

If a fund relies on the Derivatives Rule, the Division 

will, among other things: (1) assess whether registered 

investment companies, including mutual funds (other 

than money market funds), exchange-traded funds (ETFs) 

and closed-end funds, as well as business development 

companies (BDCs), have adopted and implemented policies and procedures reasonably 

designed to manage the funds’ derivatives risks and to prevent violations of the Derivatives 

Rule pursuant to Investment Company Act Rule 38a-1; and (2) review for compliance 

with Rule 18f-4, including the adoption and implementation of a derivatives risk 

management program, board oversight, and whether disclosures concerning the fund’s use 

of derivatives are incomplete, inaccurate or potentially misleading.

DID YOU KNOW?

The compliance date for the SEC's new 

Marketing Rule was November 4, 2022.
10 | U.S. SECURITIES AND EXCHANGE COMMISSION

Investment Company Act Fair Valuation Rule 2a-5. The Division will, among other 

things: (1) assess funds’ and fund boards’ compliance with the new requirements for 

determining fair value, implementing board oversight duties, setting recordkeeping and 

reporting requirements, and permitting the funds’ board to designate valuation designees 

to perform fair value determinations subject to oversight by the board; and (2) review 

whether adjustments have been made to valuation methodologies, compliance policies 

and procedures, governance practices, service provider oversight, and/or reporting and 

recordkeeping.

B. RIAs to Private Funds

RIAs to private funds represent a significant portion of the RIA population. Currently, 

more than 5,500 RIAs, totaling over 35% of all RIAs, manage approximately 50,000 

private funds with gross assets exceeding $21 trillion. Private fund assets continue to grow. 

In the past five years, there has been an 80% increase in the gross assets of private funds, 

with retirement plans steadily contributing to this growth. These assets are deployed 

through a variety of investment strategies used by hedge funds, private equity funds, and 

real estate-related funds, among others. 

Given these facts, the Division will continue to focus on 

RIAs to private funds. In particular, the Division will 

focus on private fund RIAs’: (1) conflicts of interest; 

(2) calculation and allocation of fees and expenses, 

including the calculation of post-commitment period 

management fees and the impact of valuation practices 

at private equity funds; (3) compliance with the new 

Marketing Rule, including performance advertising and compensated testimonials 

and endorsements, such as solicitations; (4) policies and practices regarding the use of 

alternative data and compliance with Advisers Act Section 204A; and (5) compliance with 

the Advisers Act Rule 206(4)-2 (Custody Rule), where applicable, including timely delivery 

of audited financials and selection of permissible auditors.

DID YOU KNOW?

Currently, more than 5,500 RIAs, 

totaling over 35% of all RIAs, manage 

approximately 50,000 private funds 

with gross assets exceeding $21 trillion.
2023 EXAMINATION PRIORITIES | 11

In addition, the Division will focus on RIAs to private funds with specific risk 

characteristics, such as: (1) highly-leveraged private funds; (2) private funds managed 

side-by-side with BDCs; (3) private equity funds that use affiliated companies and 

advisory personnel to provide services to their fund clients and underlying portfolio 

companies; (4) private funds that hold certain hard-to-value investments, such as crypto 

assets and real estate-connected investments, with an emphasis on commercial real 

estate; (5) private funds that invest in or sponsor Special Purpose Acquisition Companies 

(SPACs); and (6) private funds involved in adviser-led restructurings, including stapled 

secondary transactions and continuation funds.

C. Standards of Conduct: Regulation Best Interest, Fiduciary Duty, and Form CRS

1. Regulation Best Interest and Fiduciary Duty

Regulation Best Interest for broker-dealers and the fiduciary standard for investment 

advisers are drawn from key fiduciary principles that include an obligation to act in a retail 

investor’s best interest and not to place the firm’s or its financial professionals’ interests 

ahead of the investor’s interest.1

The Division will continue to prioritize examinations of broker-dealers and RIAs for 

compliance with their applicable standard of conduct. In this regard, broker-dealers and 

dually registered RIAs are an area of continued interest for the Division, as are affiliated 

firms with financial professionals who service both brokerage customers and advisory 

clients. These and other examinations will continue to focus on: (1) investment advice 

and recommendations with regard to products, investment strategies, and account types; 

(2) disclosures made to investors and whether such disclosures include all material facts

relating to the conflicts of interest associated with the advice and recommendations;

(3) processes for making best interest evaluations, including those for reviewing reasonably

available alternatives, evaluating costs and risks, and identifying and addressing conflicts

of interest; and (4) factors considered in light of the investor’s investment profile, including

investment goals and account characteristics. Also, in the case of RIAs, examiners will

review whether the conflicts of interest disclosures are sufficient such that a client can

provide informed consent to the conflict, whether express or implied.

1 An investment adviser’s fiduciary duty is established by and enforced through Advisers Act Section 206. 

See Commission Interpretation Regarding Standard of Conduct for Investment Advisers, Advisers Act 

Rel. No. 5248 (June 5, 2019) (An investment adviser’s fiduciary duty is broad and applies to all 

advisory clients and the entire adviser-client relationship).
12 | U.S. SECURITIES AND EXCHANGE COMMISSION

Examinations may focus on advice or recommendations 

regarding: (1) complex products, such as derivatives and 

leveraged exchange-traded funds (ETFs), exchange-traded 

notes (ETNs), and other exchange-traded products (ETPs); 

(2) high cost and illiquid products, such as variable 

annuities and non-traded REITs; (3) proprietary products; 

(4) unconventional strategies that purport to address rising 

interest rates; and (5) microcap securities. Examinations 

may also focus on recommendations or advice to certain 

types of investors, such as senior investors and those saving for retirement, and specific 

account recommendations, such as retirement account rollovers and 529 plans. 

All broker-dealers and investment advisers have at least some conflicts of interest with 

retail investors. The nature and extent of those conflicts of interest will depend on 

various factors, including a firm’s business model. The Division will seek to identify 

and understand the economic incentives that a firm and its financial professionals have 

to recommend products, services, or account types, such as the source and structure of 

compensation, revenue, or other benefits. Part of this inquiry will look at whether the 

firm has established written policies and procedures to identify such conflicts of interest 

and periodically reviewed and updated their policies and procedures, as appropriate. The 

Division will also review whether compliance policies and procedures are tailored to the 

firm’s particular business model, compensation structure, and product menu and customer 

base and are sufficient to support compliance with the standards.

Such economic incentives may include revenue sharing, commissions (including 

markdowns and markups), or other incentivizing revenue arrangements (e.g., conflicts 

often exist if firms use the services of, or invest in the products offered by, an affiliate, 

particularly when these arrangements result in additional or higher fees to investors). 

Examinations will review how firms are managing conflicts of interest, including 

mitigating or eliminating the conflicts of interest, when appropriate.

Lastly, examinations will review whether firms have customer or client agreements that 

purport to inappropriately waive or limit their standard of conduct, such as through the 

use of hedge clauses. 

DID YOU KNOW?

All broker-dealers and investment 

advisers have at least some conflicts of 

interest with retail investors. The nature 

and extent of those conflicts of interest 

will depend on various factors, including 

a firm's business model. 
2023 EXAMINATION PRIORITIES | 13

2. Form CRS

Compliance with Form CRS will continue to be prioritized and incorporated into the 

Division’s core examinations of broker-dealers and RIAs. SEC rules require that firms 

deliver their relationship summaries to new and prospective retail investors, as well as to 

existing retail investors, file their relationship summary with the Commission and post the 

current relationship summary on the firm’s public website, if the firm has one. 

D. Environmental, Social, and Governance (ESG) Investing 

RIAs and registered funds are competing for the rising investor demand for ESG-related 

investments and strategies that incorporate certain ESG criteria, and, thus are increasingly 

offering and evaluating investments that employ such strategies and investments. 

Therefore, the Division will continue its focus on ESG-related advisory services and 

fund offerings, including whether the funds are operating in the manner set forth in their 

disclosures. In addition, the Division will assess whether ESG products are appropriately 

labeled and whether recommendations of such products for retail investors are made in 

investors’ best interest. 

II. INFORMATION SECURITY AND OPERATIONAL RESILIENCY

The Division will continue to review broker-dealers’ 

and RIAs’ practices to prevent interruptions to missioncritical services and to protect investor information, 

records, and assets. The current risk environment related 

to cybersecurity is considered elevated given the larger 

market events, geopolitical concerns, and the proliferation 

of cybersecurity attacks, particularly ransomware attacks. 

Given these risks and concerns, cybersecurity remains 

a perennial focus area for registrants, including RIAs, 

broker-dealers, investment companies, municipal advisors, 

transfer agents, exchanges and clearing agencies.

DID YOU KNOW?

The current risk environment related to 

cybersecurity is considered elevated 

given larger market events, geopolitical 

concerns and the proliferation of 

cybersecurity attacks, particularly 

ransomware attacks. 
14 | U.S. SECURITIES AND EXCHANGE COMMISSION

The Division will focus on firms’ policies and procedures, governance practices, and 

response to cyber-related incidents, including those related to ransomware attacks, and 

broker-dealers’ and RIAs’ compliance with Regulations S-P and S-ID, where applicable. 

The focus on policies and procedures will include a review as to whether they are 

reasonably designed to safeguard customer records and information—both information 

residing in registrants’ systems and stored through a third-party provider—as well as 

whether the location of such records has been properly disclosed to the Commission, 

where required.

Examinations of broker-dealers and RIAs will continue to look at firms’ practices to 

prevent account intrusions and safeguard customer records and information, including 

personally identifiable information, while recognizing that personnel may continue to 

access information in a remote environment. Additional 

focus will be on the cybersecurity issues associated with the 

use of third-party vendors, including registrant visibility into 

the security and integrity of third-party products and services. 

The Division’s focus will also include reviewing whether there 

has been an unauthorized use of third-party providers, 

particularly for transition assistance when departing RIA 

personnel attempt to migrate client information to another 

firm. 

Lastly, the Division will continue to assess systemically 

significant registrants’ operational resiliency planning, such as 

their efforts to consider and/or address climate-related risks.

III. CRYPTO ASSETS AND EMERGING FINANCIAL TECHNOLOGY

The Division continues to observe the proliferation of certain types of investments 

(e.g., crypto assets and their associated products and services) and emerging financial 

technology (e.g., broker-dealer mobile apps and RIAs choosing to provide automated 

digital investment advice to their clients). To address these observations, the Division will 

conduct examinations of broker-dealers and RIAs offering new products and services or 

employing new practices. These new practices include technological and on-line solutions 

to meet the demands of compliance and marketing and to service investor accounts (e.g., 

on-line brokerage services, internet advisers, and automated investment tools and trading 

platforms, including RIAs referred to as “robo-advisers”). 

DID YOU KNOW?

The Division will focus on firms’ 

policies and procedures, governance 

practices, and response to cyberrelated incidents, including those 

related to ransomware attacks, 

and broker-dealers’ and RIAs’ 

compliance with Regulations S-P 

and S-ID, where applicable.
2023 EXAMINATION PRIORITIES | 15

Given the disruptions caused by recent financial distress among crypto asset market 

participants, the Division will continue to monitor and, when appropriate, conduct 

examinations of potentially impacted or affected registrants. Examinations of registrants 

will focus on the offer, sale, or recommendation of, advice 

regarding and trading in crypto or crypto-related assets. 

Specifically, the staff will assess whether such market 

participants involved with crypto or crypto-related assets: 

(1) met and followed their respective standards of care 

when making recommendations, referrals, or providing 

investment advice, to the extent required; and (2) routinely 

reviewed, updated, and enhanced their compliance, 

disclosure, and risk management practices. In addition, the 

Division will focus on new or never before examined 

registrants offering crypto or crypto-related assets.

Broker-dealer and RIA examinations will also focus on firms that employ digital 

engagement practices2 and the related tools and methods to assess whether: 

(1) recommendations were made or advice was provided (e.g., through the use of social 

media marketing and social trading platforms); (2) representations are fair and accurate; 

(3) operations and controls in place are consistent with disclosures made to investors; 

(4) any advice or recommendations are in the best interest of the investor taking into 

account the investor’s financial situation and investment objectives; and (5) risks associated 

with such practices are considered, including the impact these practices may have on 

certain investors, such as seniors. 

2 For purposes of these examinations, the term “digital engagement practices” includes tools with 

behavioral prompts, differential marketing, game-like features (commonly referred to as gamification), 

and other design elements or features designed to engage with retail investors on digital platforms (e.g., 

websites, portals, and applications), as well as the analytical and technological tools and methods.

DID YOU KNOW?

Given the disruptions caused by recent 

financial distress among crypto asset 

market participants, the Division 

will continue to monitor and, when 

appropriate, conduct examinations 

of potentially impacted or affected 

registrants. 
16 | U.S. SECURITIES AND EXCHANGE COMMISSION

IV. INVESTMENT ADVISERS AND INVESTMENT COMPANIES

A. Focus Areas for Examinations of RIAs 

The Division remains focused on whether the various aspects of RIAs’ operations 

and compliance practices have appropriately adopted and considered current market 

factors, such as those that might impact valuation and the accuracy of RIA regulatory 

filings. During a typical examination, the Division reviews the compliance programs and 

related disclosures of RIAs in one or more core areas, such as custody and safekeeping 

of client assets, valuation, portfolio management, and brokerage and execution. Often 

examinations also include a review for conflicts, compliance issues and the oversight and 

approval process related to RIA fees and expenses, including: (1) the calculation of fees; 

(2) alternative ways that RIAs may try to maximize revenue, including revenue earned on 

clients’ bank deposit sweep programs; and (3) excessive fees. 

In addition to reviewing these core focus areas, examinations will review RIA policies and 

procedures for retaining and monitoring electronic communications and selecting and 

using third-party service providers.

As in previous years, the Division prioritizes RIAs that have never been examined, 

including recently registered firms, and those that have not been examined for a number of 

years. Typically, these examinations focus on firms’ compliance programs. 

B. Focus Areas for Registered Investment Companies, Including 

Mutual Funds and ETFs

The Division prioritizes examinations of registered investment companies, including 

mutual funds and ETFs, given their importance to retail investors. The perennial focus 

areas for such examinations include, among other topics, an assessment of registered 

investment companies’ compliance programs and governance practices, disclosures to 

investors, and accuracy of reporting to the SEC. 

The Division will focus on the fiduciary obligations of RIAs to registered investment 

companies, particularly with respect to their receipt of compensation for services, or 

other material payments made by such registered investment companies and other 

sources. As part of its review of registered investment companies’ compliance programs 

and governance practices, the Division will continue to evaluate boards’ processes for 

assessing and approving advisory and other fund fees, particularly for funds with weaker 

performance relative to their peers. In addition, the Division will assess the effectiveness of 

funds’ derivatives risk management programs and liquidity risk management programs, as 

applicable. 
2023 EXAMINATION PRIORITIES | 17

The Division will also focus on funds with specific characteristics, such as: (1) turnkey 

funds, to review their operations and assess effectiveness of their compliance programs;3

(2) mutual funds that converted to ETFs, to assess governance and disclosures associated 

with the conversion to an ETF; (3) non-transparent ETFs, to assess compliance with the 

conditions and other material terms of their exemptive relief; (4) loan-focused funds, such 

as leveraged loan funds and funds focused on collateralized loan obligations, for liquidity 

concerns and to review whether the funds have been significantly impacted by, and have 

adapted to, elevated interest rates; and (5) medium and small fund complexes that have 

experienced excessive staff attrition, to focus on whether such attrition has affected 

the funds’ controls and operations. The Division will also monitor the proliferation of 

volatility-linked and single-stock ETFs, and may review such funds’ disclosures, marketing, 

conflicts, and compliance with portfolio management disclosures, among other things.

As with RIA examinations, the Division will prioritize registered investment companies 

that have never been examined, including recently registered investment companies, and 

those that have not been examined in a number of years. These examinations often focus 

on corporate governance, the advisory contract approval process, fund code of ethics, 

practices that deviate from disclosures, and the implementation and effectiveness of the 

fund’s compliance program, including the oversight of service providers through which the 

fund conducts its activities.

V. BROKER-DEALER AND EXCHANGE EXAMINATION PROGRAM

A. Broker-Dealers

The Division has long emphasized the importance 

of robust broker-dealer compliance and supervisory 

programs as a proactive measure to ensure compliance 

with the federal securities laws. This year, the Division 

intends to focus examinations on broker-dealer 

compliance and supervisory programs generally, including 

those for electronic communications related to firm 

business, as well as the recordkeeping for those electronic 

communications. 

3 In this context, the term “turnkey funds” references funds that utilize a turnkey solutions provider 

for infrastructure purposes (i.e., to organize, operate, and service the funds, such as governance and 

compliance services).

DID YOU KNOW?

The Division intends to focus 

examinations on broker-dealer 

compliance and supervisory programs 

generally, including those for electronic 

communications related to firm 

business, as well as the recordkeeping 

for those electronic communications. 
18 | U.S. SECURITIES AND EXCHANGE COMMISSION

Broker-dealers that hold customer cash and securities have a responsibility to ensure that 

those assets are safeguarded in accordance with the Customer Protection Rule and the Net 

Capital Rule. The Division will continue to prioritize the examination of broker-dealers 

for compliance with these rules, including the adequacy of internal processes, procedures, 

and controls. Examiners will also assess broker-dealer credit, market, and liquidity risk 

management controls to ensure that firms have sufficient liquidity to manage stress events.

The Division will continue to examine broker-dealer trading practices in both equities 

and fixed income securities. Examinations will assess conflicts of interest in order routing 

and execution that may negatively affect retail investors. Examinations will also focus on 

compliance with Regulation SHO, including the rules regarding aggregation units and 

locate requirements. The Division will also examine the operations of alternative trading 

systems for compliance with Regulation ATS, and in particular focus on consistency with 

their disclosures provided in Form ATS-N.

The Division will continue to focus on issues specific to municipal securities and other 

fixed income securities, such as fairness of pricing, compliance with confirmation 

disclosure requirements, and municipal securities dealer and municipal underwriter 

compliance with obligations related to municipal issuer disclosure. The Division will also 

continue to focus on issues specific to over-the-counter securities and microcap securities, 

such as compliance with Securities Exchange Act of 1934 (Exchange Act) Rule 15c2-11, 

which requires broker-dealers to refrain from publishing quotations for an issuer’s security 

when current issuer information is not publicly available (among other requirements) 

unless an exception is available, and compliance with the penny stock disclosure rules (i.e., 

Exchange Act Rules 15g-2 through 15g-6). Examiners will also seek to identify whether 

firms may be involved in the illegal distribution of unregistered securities. 

B. National Securities Exchanges

National securities exchanges provide marketplaces for facilitating securities transactions 

and, under the federal securities laws, serve as self-regulatory organizations responsible 

for enforcing compliance by their members with the federal securities laws and rules and 

the exchanges’ own rules. The Division will examine the national securities exchanges 

to assess whether they are meeting their obligations under the federal securities laws. 

Examinations will focus on exchange operations to monitor, investigate, and enforce 

member and listed company compliance with self-regulatory organizations rules and the 

federal securities laws.
2023 EXAMINATION PRIORITIES | 19

C. Security-Based Swap Dealers (SBSDs)

SBSDs act as market makers or dealers in security-based swaps by regularly entering 

into security-based swaps with counterparties as an ordinary course of business for their 

own account. Examinations will continue to focus on whether SBSDs have implemented 

policies and procedures related to compliance with SBS rules generally. In addition, 

examinations will focus on whether SBSDs are meeting their obligations under Regulation 

SBSR to accurately report SBS transactions to swap data repositories, among other 

requirements. 

D. Municipal Advisors

Municipal advisors provide advice to, or on behalf of, a municipal entity or obligated 

person with respect to municipal financial products or the issuance of municipal 

securities or municipal financial products. The Division will continue to examine whether 

municipal advisors have met their fiduciary duty to municipal entity clients as well as 

whether municipal advisors have complied with MSRB Rule G-42, which establishes the 

core standards of conduct and duties applicable to municipal advisors when engaging 

in municipal advisory activities. The Division will also continue to examine whether 

municipal advisors have disclosed conflicts of interest and have met their relationship 

documentation, registration, professional qualification, and supervision requirements. 

E. Transfer Agents

Transfer agents serve as agents for securities issuers and are responsible for maintaining 

security holder records, recording changes of ownership, canceling and issuing 

certificates, distributing dividends and other payments to security holders, and facilitating 

communications between issuers and security holders. The Division will continue to 

examine transfer agent processing of items and transfers, recordkeeping and record 

retention, safeguarding of funds and securities, and filings with the Commission. 

Examinations will also focus on transfer agents that service certain types of issuers, 

including microcap and crypto assets, and transfer agents that use emerging technology to 

perform their transfer agent functions. 
20 | U.S. SECURITIES AND EXCHANGE COMMISSION

VI. CLEARANCE AND SETTLEMENT

Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act 

of 2010 (Dodd-Frank Act) requires the SEC to examine, at least once annually, each

clearing agency designated as systemically important and for which the SEC serves as the

supervisory agency. Pursuant to Section 807 of the Dodd-Frank Act, these examinations

will focus on clearing agencies’ core risks, processes, and controls and will cover the

specific areas required by statute, including the nature of clearing agencies’ operations

and assessment of financial and operational risk. Additionally, the Division will conduct

risk-based examinations of other registered clearing agencies that have not been designated

as systemically important. The Division will examine all registered clearing agencies for

compliance with the SEC’s Standards for Covered Clearing Agencies, which are rules that

require covered clearing agencies to have policies and procedures that address, among

other things, maintaining sufficient financial resources, protecting against credit risks,

managing member defaults, and managing operational and other risks.

Examinations of registered clearing agencies include both risk-based exams and corrective

action reviews, and are undertaken to assess: (1) whether the clearing agencies’ respective 

risk management frameworks comply with the Exchange Act, and serve the needs of their 

members and the markets they serve; (2) the adequacy and timeliness of their remediation 

of prior deficiencies, including, for example, the role of senior leadership in the 

remediation process; and (3) other risk areas identified in collaboration with the SEC’s 

Division of Trading and Markets and other regulators. In addition, the Division will also 

examine other entities providing clearing services, which may include swap data 

repositories, as well as entities providing clearing services exempt from registration.

Areas of focus in fiscal year 2023 may include liquidity risk management, counterparty

credit stress testing, governance and escalation, and the compliance function, among

other things. Finally, the Division consults with the Federal Reserve Board each year on

the scope and methodology of the SEC’s Dodd-Frank examinations, as required by that

Act, and routinely consults with the SEC’s Division of Trading and Markets concerning

risks it observes in its supervisory role over the above clearing agencies. These risks are

incorporated into the risk-based planning of the examinations discussed above.
2023 EXAMINATION PRIORITIES | 21

VII. REGULATION SYSTEMS COMPLIANCE AND INTEGRITY (SCI) 

The Commission adopted Regulation SCI to strengthen the technology infrastructure of 

the U.S. securities markets. Regulation SCI entities include national securities exchanges, 

registered and certain exempt clearing agencies, FINRA, MSRB, plan processors, and 

alternative trading systems that meet certain volume thresholds. Among other things, these 

critical market infrastructure entities must establish, maintain, and enforce written policies 

and procedures reasonably designed to ensure that their systems’ capacity, integrity, 

resiliency, availability, and security is adequate to maintain their operational capability 

and promote the maintenance of fair and orderly markets. The Division will continue to 

evaluate whether SCI entities have established, maintained, and enforced written policies 

and procedures as required. Areas of focus will include: 

Software Development Life Cycle. The Division will evaluate whether the policies and 

procedures of SCI entities are reasonably designed, with a particular focus on the programs 

of SCI entities to review and keep current systems development and testing methodologies. 

Third-Party Dependencies. The Division will assess whether policies and procedures are 

reasonably designed to ensure that SCI systems operated by third-parties on behalf of SCI 

entities have adequate levels of capacity, integrity, resiliency, availability, and security. 

Network Segmentation. The Division will assess whether a system if breached, would be 

reasonably likely to pose a security threat to SCI systems. 

Application Programing Interface. Reliance on external applications, such as those residing 

in the cloud might introduce security and operational risks to SCI systems. The Division 

will assess whether policies and procedures are reasonably designed to ensure SCI systems 

have adequate levels of security to maintain the SCI entity’s operational capability. 
22 | U.S. SECURITIES AND EXCHANGE COMMISSION

VIII. FINRA AND MSRB

A. FINRA

FINRA oversees approximately 3,400 brokerage firms, 150,000 branch offices, and 

more than 620,000 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 brokerdealer advertisements, administers the testing and licensing 

of registered persons, and operates industry utilities, such 

as Trade Reporting Facilities. 

The Division conducts risk-based oversight examinations 

of FINRA. It selects areas within FINRA to examine 

through a risk assessment process designed to identify 

those aspects of FINRA’s operations important to the 

protection of investors and market integrity, including 

FINRA’s implementation of investor protection initiatives 

such as Regulation BI and Form CRS. The analysis is informed by collecting and analyzing 

extensive information and data, regular meetings with key functional areas within FINRA, 

and outreach to various stakeholders, including broker-dealers and investor groups. Based 

on the outcome of this risk-assessment process, the Division conducts inspections of 

FINRA’s major regulatory programs. The Division also conducts oversight examinations 

of FINRA’s examinations of certain broker-dealers and municipal advisors that are 

FINRA members. From its observations during all of these inspections and examinations, 

the Division makes detailed recommendations to improve FINRA’s programs, its risk 

assessment processes, and its future examinations.

B. MSRB

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

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

(including registered 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. The Division, along with FINRA and the federal banking regulators, conducts 

examinations of registered firms to assess compliance with MSRB rules. The Division also 

applies a risk assessment process, similar to the one it uses to oversee FINRA, to identify 

areas to examine at MSRB. 

DID YOU KNOW?

FINRA oversees approximately 3,400 

brokerage firms, 150,000 branch 

offices, and more than 620,000 

registered representatives through 

examinations, enforcement, and 

surveillance.
2023 EXAMINATION PRIORITIES | 23

IX. ANTI-MONEY LAUNDERING (AML)

The Bank Secrecy Act requires financial institutions, including broker-dealers and certain 

registered investment companies, to establish AML programs that are tailored to address 

the risks associated with the firm’s location, size, and activities, including customers they 

serve, the type of products and services offered, and the means by which those products 

and services are offered. These programs must, among other things, include policies 

and procedures reasonably designed to identify and verify the identity of customers and 

beneficial owners of legal entity customers, perform customer due diligence (as required by 

the Customer Due Diligence rule), 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 behaviors. 

The importance of conducting examinations of AML programs of broker-dealers and 

certain registered investment companies has been elevated due to the current geopolitical 

environment and the increased imposition of international sanctions, as has the review 

of firms’ monitoring and compliance with OFAC and Treasury-related sanctions. The 

Division will continue to prioritize examinations of broker-dealers and certain registered 

investment companies for compliance with their AML obligations in order to assess, 

among other things, whether firms have established appropriate customer identification 

programs and whether they are satisfying their SAR filing obligations, conducting ongoing 

due diligence on customers, complying with beneficial ownership requirements, and 

conducting robust and timely independent tests of their AML programs. The goal of these 

examinations is to evaluate whether broker-dealers and registered investment companies 

have adequate policies and procedures in place that are reasonably designed to identify 

suspicious activity and illegal money-laundering activities.

X. THE LONDON INTERBANK OFFERED RATE (LIBOR) TRANSITION

The discontinuation of LIBOR could have a significant impact on the financial markets 

and may present a material risk for certain market participants, including the RIAs, 

broker-dealers, investment companies, municipal advisors, 

transfer agents and clearing agencies overseen by the 

Division. The Division will continue to assess brokerdealer and RIA preparation for the transition away from 

LIBOR. LIBOR is currently scheduled for discontinuation 

in mid-2023.

DID YOU KNOW?

LIBOR is currently scheduled for 

discontinuation in mid-2023.
24 | U.S. SECURITIES AND EXCHANGE COMMISSION

XI. CONCLUSION

These priorities reflect the Division’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 Divisions and Offices at the SEC as well as other regulators. While 

the Division will allocate significant resources to the examination issues described herein, it 

will also conduct examinations focused on and devote resources to new or emerging risks, 

products and services, market events, and investor concerns. 

The Division 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. Our contact information is available at https://www.sec.gov/exams. 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