Morgan Lewis Releases Report on SEC Exams and Enforcement Developments

Morgan Lewis recently released a report detailing developments in both SEC and FINRA examinations. Of relevance to fund directors, the report highlights a summary of ESG-related enforcement actions including two cases involving investment advisers that managed mutual funds. The report notes, “ESG investment practices will be further complicated by a series of proposed rules intended to achieve more standardized and comparable disclosures and reporting of ESG information to both investors and the SEC.” The report also outlines recent enforcement cases against investment advisers in cyber security, conflicts of interest, record-keeping failures (including “off-channel communications”), and chief compliance officer liability. Areas of focus continue to be with products including complex products such as “derivatives and leveraged exchange-traded funds, exchange-traded notes and other exchange-traded products,” advisers’ operations and compliance programs, and fees. Regarding fees, the Commission is likely to examine the calculation of fees, the sue of sweep accounts, and excessive fees. The Commission is also focused on enforcement in outsourcing to third-parties, short term products (such as single-stock ETFs), and digital assets.

Click here to access the report, relevant updates begin on page six.