SEC Division of Examinations Announces 2024 Priorities

In mid-October, the Securities and Exchange Commission’s (SEC) Division of Examinations released its 2024 Examination Priorities. The priorities inform investors and registrants of the key risks, examination topics, and priorities that the Division plans to focus on in the upcoming year. Overall, the Division of Examinations plans to focus on the investment advisers’ duty of care and loyalty, the processes for determining the best interest of the client is followed, disclosures made to investors, trading practices at broker-dealers, risks and controls at clearing agencies, and record-keeping responsibilities.

Of note to fund directors, the Exams staff plans to prioritize its focus on the evaluation of compliance programs, governance practices, disclosures to investors, and the accuracy of reporting to the SEC during investment company examinations. More specifically, investment company exam priorities include:

• Advisory and Fund Fees with a focus on board processes and those funds with weaker performance than their peers. Exams will also review cases where different advisory fees are charged to different share classes of the same fund and when the same strategies are offered by a sponsor through different distribution channels with different fee structures.
• Fair valuation and implementation of board oversight responsibilities. Examinations will also review the effectiveness of fund derivatives risk management and liquidity risk management programs.
• Compliance with exemptive order conditions.

Notably, ESG remains absent from the 2024 Exam Priorities publication. Division of Examinations’ Director Richard R. Best stated, “continuing to make our examination priorities public increases transparency into the examination program and encourages firms to focus their compliance and surveillance efforts on areas of potentially heightened risk to retail investors.” SEC Chair Gary Gensler stated, “The Division’s efforts, as laid out in the 2024 priorities, enhance trust in our ever-evolving markets.”

Click here to read the 2024 Exam priorities.
Click here to view the SEC’s press release covering the priorities.