# Division of Examinations Announcements

Division of Examinations Announcements – Announcements

- Risk Alert: Shortening the Securities Transaction Settlement Cycle Today the Division of Examinations published a Risk Alert regarding the shortening of the securities transaction settlement cycle.  On May 28, 2024, the standard settlement cycle for most broker-dealer transactions in the U.S. will shorten from two business days after the trade date to one business day after the trade date (“T+1”).   This is also the compliance date for new rules related to the processing of institutional trades by broker-dealers and certain clearing agencies, as well as certain recordkeeping amendments applicable to registered investment advisers. It is critical that registrants and other market participants prepare for the shortened settlement cycle and understand the impacts of T+1 and the final rules to identify necessary changes and critical dependencies in order to successfully manage this transition. To assess registrant preparedness, EXAMS intends to continue engaging with registrants through examinations and outreach.  The Risk Alert provides registrants with additional information about the scope and content of the examinations and outreach. View the Risk Alert:  Shortening the Securities Transaction Settlement Cycle
- Risk Alert: Observations Related to Security-Based Swap Dealers Observations from Examinations Related to Security-Based Swap DealersToday the Division of Examinations published a Risk Alert presenting examination and outreach observations concerning compliance with rules applicable to security-based swap dealers. In sharing these observations, the Division seeks to remind security-based swap dealers of their obligations under relevant security-based swap rules and encourage security-based swap dealers to consider improvements in their compliance programs, as may be appropriate, to further compliance with Exchange Act requirements.The Risk Alert presents observations in the following areas (1) reporting of security-based swap transactions and correction of reporting errors; (2) business conduct standards; (3) security-based swap trading relationship documentation and portfolio reconciliation; and (4) recordkeeping.View the Risk Alert: Observations Related to Security-Based Swap Dealers
- Denver Regional Office Compliance Outreach: Registration is now open for the in-person events to be held on October 24th (Denver) and October 26th (Salt Lake City). SEC’s Denver Regional Office to host in-person Compliance Outreach Seminars in October. To see additional details regarding these events and to register for in-person attendance, please visit the 2023 Compliance Outreach Regional Seminar page here.
- Risk Alert: Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting Documents Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting DocumentsToday, the Division of Examinations published a Risk Alert providing additional information regarding the Division’s risk-based approach for both selecting registered investment advisers to examine and in determining the scope of risk areas to examine.The Risk Alert also includes an attachment with the staff’s typical initial request for documents and information, as well as additional requests for information and documents from the adviser the staff may request as the examination progresses.View the Risk Alert: Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting Documents
- Risk Alert: Observations from Anti-Money Laundering Compliance Examinations of Broker-Dealers Observations from Anti-Money Laundering Compliance Examinations of Broker-DealersToday the Division of Examinations published a Risk Alert presenting examination observations about key AML requirements. It reiterates the critical importance of AML compliance to the Commission and law enforcement’s pursuit of misconduct that could threaten the safety of investor assets and the integrity of the financial markets.The Risk Alert presents examination observations about key AML requirements, such as independent testing of firms’ AML programs and training of their personnel, and identification and verification of customers and their beneficial owners.View the Risk Alert:  Observations from Anti-Money Laundering Compliance Examinations of Broker-Dealers.
- Risk Alert: Examinations Focused on Additional Areas of the Adviser Marketing Rule Examinations Focused on Additional Areas of the Adviser Marketing RuleToday the Division of Examinations published a Risk Alert to inform investment advisers, including private fund advisers, about additional areas of emphasis during examinations focused on the amended Marketing Rule.  The Risk Alert sets forth these additional areas, which include (1) testimonials and endorsements; (2) third-party ratings; and (3) Form ADV.  View the Risk Alert:  Examinations Focused on Additional Areas of the Adviser Marketing Rule.
- Risk Alert: Observations from Examinations of Investment Advisers and Investment Companies Concerning LIBOR-Transition Preparedness Observations from Examinations of Investment Advisers and Investment Companies Concerning LIBOR-Transition PreparednessToday the Division of Examinations published a Risk Alert regarding a series of examinations to assess investment adviser and investment company (“firms”) preparedness for the cessation of LIBOR. LIBOR is scheduled to be discontinued after June 30, 2023.The Risk alert aims to remind firms of this transition and discusses certain practices firms have implemented to address the transition away from LIBOR.View the Risk Alert: Observations from Examinations of Investment Advisers and Investment Companies Concerning LIBOR-Transition Preparedness
- Risk Alert: Safeguarding Customer Records and Information at Branch Offices Safeguarding Customer Records and Information at Branch OfficesToday the Division of Examinations published a Risk Alert highlighting the importance of establishing written policies and procedures for safeguarding customer records and information at branch offices.The Risk Alert discusses common issues related to branch office governance in the areas of vendor management, email configuration, data classification, access management, and technology risk.View the Risk Alert: Safeguarding Customer Records and Information at Branch Offices
- Risk Alert: Observations from Examinations of Newly-Registered Advisers Observations from Examinations of Newly-Registered AdvisersToday the Division of Examinations published a Risk Alert discussing the typical focus areas reviewed during examinations of newly-registered advisers and shares staff observations regarding compliance policies and procedures, disclosures, and marketing practices.To assist advisers further, the Risk Alert provides some resources with reference links.View the Risk Alert: Observations from Examination of Newly-Registered Advisers
- Observations from Broker-Dealer Examinations Related to Regulation Best Interest Today the Division of Examinations published a Risk Alert to highlight observations from examinations related to Regulation Best Interest. The Risk Alert is intended to assist broker-dealers in reviewing and enhancing their compliance programs related to Regulation Best Interest. The Division encourages broker-dealers to review their practices, policies, and procedures with respect to Regulation Best Interest in order to address the issues raised in the Risk Alert.  View the Risk Alert: Observations from Broker-Dealer Examinations Related to Regulation Best Interest
- Observations From Broker-Dealer and Investment Adviser Compliance Examinations Related to Prevention of Identity Theft Under Regulation S-ID Today the Division of Examinations published a Risk Alert to highlight observations from investment adviser and broker-dealers related to compliance with Regulation S-ID. The Risk Alert is intended to assist firms with implementing policies and procedures under Regulation S-ID, which requires the development and implementation of an identity theft prevention program for firms that offer or maintain covered accounts.The Risk Alert discusses the requirements of Regulation S-ID and issues observed with respect to the identification of covered accounts, establishment and administration of the identity theft program, and the required policies and procedures. Through this alert, the Division encourages broker-dealers and investment advisers to review their practices, policies, and procedures with respect to their identity theft programs and to consider whether any improvements are necessary.View the Risk Alert: Observations From Broker-Dealer and Investment Adviser Compliance Examinations Related to Prevention of Identity Theft Under Regulation S-ID
- Observations Related to Regulation NMS Rule 606 Disclosures This Risk Alert is intended to highlight observations from a series of examinations regarding how broker-dealers were complying with the new Regulation NMS disclosure requirements and to remind broker-dealers of the obligations under the new and enhanced Rule 606(a) requirements.  The Risk Alert discusses the requirements of Rule 606(a) and issues observed with quantifiable disclosures, material aspects and supervision. Through this alert, the Division encourages broker-dealers to review their policies and procedures related to the new and enhanced information requirements under Rule 606 and reevaluate the accuracy and specificity of their current Rule 606(a) disclosures within the context of these exam observations.  View the Risk Alert: Observations Related to Regulation NMS Rule 606 Disclosures
- Examinations Focused on the New Investment Adviser Marketing Rule This Risk Alert is intended to inform SEC-registered investment advisers, including advisers to private funds, about upcoming review areas during examinations focused on the amended Advisers Act Marketing Rule. On December 22, 2020, the SEC adopted significant reforms under the Investment Advisers Act of 1940 to modernize rules that govern investment adviser advertisements and payments to solicitors. These amendments resulted in a single rule that replaced previous advertising and cash solicitation rules. The compliance date for the amended Marketing Rule is November 4, 2022. In sharing initial examination review areas for the Marketing Rule, the Division of Examinations encourages advisers to reflect upon their own practices, policies, and procedures and to implement any appropriate modifications to their training, supervisory, oversight, and compliance programs.View the Risk Alert:  Examinations Focused on the New Investment Adviser Marketing Rule
- Recent Observations from Municipal Advisor Examinations On November 7, 2017, the Division of Examinations (the “Division”) published a Risk Alert that provided the staff’s observations from a series of examinations of newly registered municipal advisors, with a focus on deficiencies observed in the areas of registration, recordkeeping, and supervision. In this follow-up Risk Alert, the Division reminds municipal advisors of their obligations and raises awareness among municipal advisors and other market participants of the most often cited deficiencies and weaknesses observed in recent MA examinations, which include many of the areas covered in the Risk Alert issued in 2017, as well as deficiencies and weaknesses related to municipal advisors’ disclosure to clients. In sharing the information in this Risk Alert, the Division encourages municipal advisors to review their practices, policies, and procedures in these areas and to consider improvements in their compliance programs, as may be appropriate.View the Risk Alert:  Recent Observations from Municipal Advisor Examinations
- Investment Adviser MNPI Compliance Issues The Division of Examinations (“EXAMS”) is issuing this risk alert to provide investment advisers, investors, and other market participants with information concerning notable deficiencies that the staff has cited related to Section 204A (“Section 204A”) of the Investment Advisers Act of 1940 (the “Advisers Act”) and Rule 204A-1 (the “Code of Ethics Rule”) thereunder.  Deficiencies related to Section 204A and the Code of Ethics Rule have been among the most commonly observed by EXAMS.View the Risk Alert: Investment Adviser MNPI Compliance Issues
- SEC Division of Examinations Announces 2022 Examination Priorities The Securities and Exchange Commission’s Division of Examinations announced its 2022 examination priorities, including several significant areas of focus and many perennial risk areas. The Division will focus on private funds, environmental, social and governance (ESG) investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto-assets. The Division publishes its examination priorities annually to provide insights into its risk-based approach, including the areas it believes present potential risks to investors and the integrity of the U.S. capital markets.View the Press Release: EXAMS Announces 2022 Examination PrioritiesView the Priorities Memo: 2022 Examination Priorities
- Observations from Examinations of Private Fund Advisers On June 23, 2020, the Division of Examinations (“EXAMS”) published a Risk Alert (the “2020 Private Fund Adviser Risk Alert”) providing an overview of compliance issues observed by EXAMS staff in examinations of registered advisers that manage private funds (“private fund advisers”). In light of the significant role of private fund advisers in the financial markets, EXAMS is publishing this Risk Alert detailing additional observations. This Risk Alert is intended to assist private fund advisers in reviewing and enhancing their compliance programs and also to provide investors with information concerning private fund adviser deficiencies.View the Risk Alert: Observations from Examinations of Private Fund Advisers
- Division of Examinations Observations: Investment Advisers’ Fee Calculations The staff from Division of Examinations (the “Division”) often reviews whether advisers, among other things: have adopted and are following policies and procedures that are reasonably designed to result in the fair and accurate charging of fees; and have disclosed their fees with sufficient clarity for their clients to understand the costs associated with their services. The Division previously published a Risk Alert highlighting compliance issues observed by the staff related to advisory fees (“Advisory Fees Risk Alert”). In this follow up Risk Alert, the Division is supplementing the Advisory Fees Risk Alert by providing greater detail on certain compliance issues observed during the recent Advisory Fees Initiative examinations, including additional details regarding the staff’s observations concerning fee-related deficiencies and fee-related compliance and disclosure issues.View the Risk Alert: Division of Examinations Observations: Investment Advisers’ Fee Calculations
- Observations from Examinations of Advisers that Provide Electronic Investment Advice The Division of Examinations (“Division”) has recently observed a significant increase in the number of investment advisers choosing to provide automated digital investment advisory services to their clients. The purpose of this Risk Alert is to raise awareness of certain compliance issues the Division observed while conducting examinations of advisers providing, or claiming to provide, robo-advisory services, including advisers that operate, recommend, or sponsor discretionary investment advisory programs.View the Risk Alert: Observations from Examinations of Advisers that Provide Electronic Investment Advice
- Observations from Examinations in the Registered Investment Company Initiatives The Division of Examinations (the “Division”) conducted a series of examinations that focused on mutual funds and exchange-traded funds (collectively, “funds”) to assess industry practices and regulatory compliance in certain areas that may have an impact on retail investors (“RIC Initiatives”).  This Risk Alert provides observations made by Division staff during examinations conducted under the RIC Initiatives, including examinations of more than 50 fund complexes, and is intended to highlight risk areas and assist funds and their advisers in developing and enhancing their compliance programs and practices.View the Risk Alert: Observations from Examinations in the Registered Investment Company Initiatives
- Observations Regarding Fixed Income Principal and Cross Trades by Investment Advisers from an Examination Initiative On September 4, 2019, the Division of Examinations (the “Division”) published a Risk Alert highlighting the most common compliance issues observed by the staff related to principal and agency cross trades under the Investment Advisers Act of 1940 (“Principal Transactions Risk Alert”). In this follow-up Risk Alert, the Division supplements the staff’s observations made in the Principal Transactions Risk Alert by providing greater detail on certain compliance issues. These observations are derived from an examination initiative that focused on SEC-registered investment advisers that engaged in cross trades, principal trades, or both, involving fixed income securities. The Division encourages advisers to review their written policies and procedures regarding principal and cross trades, including the implementation of those policies and procedures, to ensure that they are consistent with the Advisers Act and the rules thereunder.View the Risk Alert:  Observations Regarding Fixed Income Principal and Cross Trades by Investment Advisers from an Examination Initiative
- Observations from Examinations of Investment Advisers Managing Client Accounts That Participate In Wrap Fee Programs The Division of Examinations ("The Division") focused on wrap fee programs because of the continued growth of investor assets participating in such programs and the conflicts and disclosure practices observed during previous examinations. This Risk Alert discusses the most frequently cited deficiencies and other staff observations from the Division's Wrap Fee Initiative examinations. In sharing the information in this Risk Alert, the Division encourages advisers that recommend wrap fee programs to consider and adopt policies and procedures to address those risks, conflicts, and challenges. View the Risk Alert: Observations from Examinations of Investment Advisers Managing Client Accounts That Participate In Wrap Fee Programs
- The Division of Examinations’ Review of ESG Investing The Division of Examinations is issuing this Risk Alert to highlight observations from recent exams of investment advisers, registered investment companies, and private funds offering environmental, social, and governance (ESG) products and services.  View the Risk Alert: The Division of Examinations’ Review of ESG Investing
- Compliance Issues Related to Suspicious Activity Monitoring and Reporting at Broker-Dealers The Division of Examinations (“EXAMS”) conducts examinations of broker-dealers and mutual funds regarding their compliance with anti-money laundering (“AML”) requirements.  In sharing its observations from these examinations of broker-dealers, EXAMS seeks to remind firms of their obligations under AML rules and regulations and to assist broker-dealers in reviewing and enhancing their AML programs, in particular their monitoring for and reporting of suspicious activity to law enforcement and financial regulators.View the Risk Alert: Compliance Issues Related to Suspicious Activity Monitoring and Reporting at Broker-Dealers
- SEC Division of Examinations Announces 2021 Examination Priorities View the Press Release: EXAMS Announces 2021 Examination PrioritiesView the Priorities Memo: 2021 Examination Priorities