SEC Division of Examinations Announces 2022 Priorities

The SEC’s Division of Examinations announced its 2022 examination priorities, including several significant areas of focus and perennial risk areas. EXAMS will focus on private funds, ESG investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto assets. With respect to mutual funds, the Division will continue to review certain perennial focus areas, including disclosures to investors, accuracy of reporting to the SEC, compliance with the new rules and exemptive orders (including ETF rules and exemptive orders for non-transparent, actively managed ETFs, and custom baskets). The Division will also focus on liquidity risk management programs and consider whether the programs are reasonably designed to assess and manage the funds’ liquidity risk, and review the implementation of required liquidity classifications, including oversight of third-party service providers. The Division will prioritize certain types of registered funds, portfolio investments, and fund practices, including: (1) money market funds, for compliance with applicable requirements, including stress-testing, website disclosures, and board oversight; and (2) business development companies, for valuation practices, marketing activities, and conflicts of interest with underlying portfolio companies. The Division’s focus on portfolio investments will include examinations of mutual funds investing in private funds to assess risk disclosure and valuation issues. EXAMS will also focus on advisory fee waivers “to assess the sustainability of services for firms that provide such waivers, and trading activities of portfolio managers that may be designed to inflate fund performance.”