The SEC’s Office of Compliance Inspections and Examinations (OCIE) released its Examination Priorities for 2016 this week and announced that it would assess market-wide risks, examine issues related to retail investor protection, and continue to leverage data analytics to detect potentially illegal activities. The market-wide risk assessments include examinations of advisers to funds and ETFs with exposure to potentially illiquid fixed income investments.
Among the initiatives designed to protect retail investors is a focus on ETFs regarding compliance with exemptive orders and creation and redemption processes. Additionally, OCIE will review “sales strategies, trading practices, and disclosures involving ETFs, including excessive portfolio concentration, primary and secondary market trading risks, adequacy of risk disclosure, and suitability, particularly in niche or leveraged/inverse ETFs.”
OCIE also plans to focus on the suitability of variable annuity sales and related disclosure and supervision and the cybersecurity compliance and controls of broker-dealers and investment advisers. In addition, OCIE plans to continue its risk-based examinations of never before examined investment companies and investment advisers.