November 1, 2024
Who may be interested: Registered Investment Companies; Directors of Registered Investment Companies; Investment Advisers
Quick Take: The staff of the SEC Division of Examinations (Staff) recently released its 2025 examination priorities. The timing of the release aligns with the start of the SEC’s fiscal year to provide transparency and inform participants of the Staff’s focus areas in the upcoming fiscal year. In its release, the Staff indicated that exams will continue to focus on core areas such as review of compliance programs and governance practices, disclosures to investors, and an adviser’s adherence to its fiduciary duties, as well as newer areas of focus, including compliance with new rules, the use of emerging technologies, and the soundness of controls intended to protect investor information, records, and assets.
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In its release, the Staff identified a broad range of examination priorities, which covered various market participants.
Registered Funds
The Staff will prioritize multiple focus areas specific to registered investment companies. The Staff will continue its perennial focus on compliance programs, disclosures to investors, and governance practices. Focus areas may include review of specific topics or characteristics, with the Staff highlighting:
The Staff indicated that it will continue to monitor developing areas of interest, such as funds with exposure to commercial real estate and compliance with new and amended rules.
The Staff will also continue to prioritize examinations of funds that have never been examined or have not been examined in a number of years.
Registered Investment Advisors
As noted above, the Staff indicated that it will continue to review an adviser’s adherence to its fiduciary duties. In this respect, the Staff stated that it would prioritize reviewing:
The Staff will continue to focus its examinations on an adviser’s compliance program, which might include a review of:
The Staff noted that the focus or depth of a review of an adviser’s compliance program depends on the adviser’s practices or products. For instance, the Staff suggested that there may be a more in-depth review of policies and disclosures relating to use of artificial intelligence (AI) for advisers integrating AI into their advisory operations, and a more in-depth review of supervision and oversight practices for advisers who utilize a large number of independent contractors working from geographically dispersed locations.
The Staff will continue to prioritize examinations of advisers that have never been examined and those that have not been examined in a number of years.
Private Fund Advisers
The Staff noted that private fund advisers remain a significant portion of the SEC-registered adviser population, and that examinations will focus on topics such as:
The release also covered examination priorities with respect to broker-dealers, self-regulatory organizations, clearing agencies, and other market participants.
For more detailed information, the Staff’s 2025 examination priorities are available here, and the SEC’s press release on the Staff’s 2025 examination priorities is available here.
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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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