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SEC Exams to Focus on Disclosures, Robos, Cryptocurrencies

By Alex Padalka February 8, 2018

In 2018 the SEC’s Office of Compliance Inspections and Examinations plans to pay closer attention to matters involving retail investors, particularly when it comes to disclosures, and zero in on cryptocurrencies, initial coin offerings and secondary market trading, the regulator says in a press release.

The SEC’s examination priorities for 2018 include renewed focus on disclosures of fees, supervision of reps selling products and services and scrutiny of customer order execution in fixed income securities, according to the press release. The OCIE will also pay close attention to disclosures about the risks associated with investing in digital currencies and initial coin offerings, the SEC says.

The regulator will also continue monitoring digital advice platforms, with a special focus on their compliance programs, including algorithm oversight, investor data protection and disclosures of conflicts of interest, according to the exam priorities. The SEC has made progress in the ratio of investment advisors it examines each year, from just 8% five years ago to 15% in fiscal year 2017, the regulator says. In 2018, the SEC plans to target those advisors it has never examined before, according to the regulator.

Senior investors and retirement accounts will continue to be a major area of focus, with particular attention to how broker-dealers supervise their reps’ interactions with senior clients and their ability to spot the potential exploitation of seniors, the SEC says.


The regulator says it will also prioritize cybersecurity issues, including advice firms' vendor management, risk assessment, and preparedness for preventing data loss, according to the SEC. And anti-money laundering programs will continue to be a major point of scrutiny for the regulator, particularly when it comes to how firms are adapting to new regulatory obligations, the SEC says.

The regulator also says the current priorities list isn’t exhaustive and that it may add more areas of financial advice in light of emerging trends and risks.