Ranah Esmaili is partner, Victoria Anglin is managing associate, and Marie Fang is an associate at Sidley Austin LLP. This post is based on a Sidley memorandum by Ms. Esmaili, Ms. Anglin, Ms. Fang, Chuck Daly, Laurin Blumenthal Kleiman, and Elizabeth Shea Fries.
On March 30, 2022, the U.S. Securities and Exchange Commission (SEC) Division of Enforcement (EXAMS or Division) issued its annual examination priorities. [1] Consistent with its recent rulemaking activity, in its accompanying release, the SEC highlighted private funds; Environmental, Social and Governance (ESG) investing; retail; cyber; and digital assets as key examination priorities. This post provides a concise summary of upcoming examination priorities and perennial issues registrants can anticipate in the following year’s examinations.
Fiscal Year 2021 Highlights
The SEC highlighted some key metrics from the prior fiscal year. In FY 2021, the Division completed 3,040 examinations, which represent a 3% increase from the prior year, and is on par with prepandemic fiscal year 2019. The Division examined approximately 16% of registered investment advisers (RIAs). Approximately 70% (specifically, 2,100) of all examinations resulted in deficiency letters, and approximately 6% (specifically 190) resulted in referrals to the Division of Enforcement for investigation.
Importance of Compliance Programs
The Division highlighted the importance of registrants’ improving and promoting compliance at the firms, including compliance engagement across business lines; knowledgeable chief compliance officers; commitment to compliance by firms’ principals; and resiliency of compliance programs to withstand changes in market conditions, investor demand, key personnel, services, and lines of business.