SEC Division of Examinations Announces 2024 Priorities: A Focus on Investor Protection and Market Integrity

The Securities and Exchange Commission's Division of Examinations has unveiled its examination priorities for the year 2024. These priorities, which were released to inform investors and registrants, underline the key risks and issues that the Division will address in the upcoming year.

SEC Chair Gary Gensler emphasized the essential role played by the Division of Examinations in safeguarding investors and facilitating capital formation. He explained that these examinations serve to ensure registrants' compliance with established rules, helping them understand and adhere to regulatory guidelines. This, in turn, fosters trust in an ever-evolving market environment.

Key Highlights of the 2024 Examination Priorities

1. Emerging Risks and Core Areas: The Division's 2024 examinations will focus on areas presenting emerging risks to investors and the markets, along with core and perennial risk areas. This approach reflects the Division's commitment to staying ahead of evolving threats to the financial landscape.
2. Regulatory Oversight of FINRA: The Division will conduct risk-based oversight examinations of the Financial Industry Regulatory Authority (FINRA), which supervises approximately 3,400 brokerage firms, 150,000 branch offices, and more than 620,000 registered representatives. The goal is to ensure the effectiveness of investor protection initiatives and rule implementations.
3. Examinations of Municipal Securities Rulemaking Board (MSRB): Collaborating with FINRA and federal banking regulators, the Division will examine registered firms' compliance with MSRB rules and applicable federal securities laws. The MSRB oversees broker-dealers involved in municipal securities, emphasizing market transparency and education.
4. Information Security and Operational Resiliency: The Division will scrutinize practices within broker-dealers and advisers to prevent operational interruptions, safeguard investor information, and protect records and assets. This focus on cybersecurity aims to counter the elevated risk of cyberattacks, given firms' dispersed operations and global concerns.
5. Third-Party Vendor Oversight: Registrants' identification and management of risks associated with third-party vendors will be closely assessed. The Division will evaluate how registrants address risks to essential business operations, examining the potential impact on U.S. securities markets.
6. Shortened Settlement Cycle: In line with the shortened settlement cycle, which comes into effect on May 28, 2024, the Division will assess registrants' preparations for this change in standard settlement cycles for broker-dealer transactions.
7. Regulation Systems Compliance and Integrity: This segment will focus on evaluating whether Regulation Systems Compliance and Integrity (SCI) entities, including national securities exchanges, have established and maintained written policies and procedures to ensure the security of their systems, including physical security at data centers.
8. Anti-Money Laundering (AML): The Division will continue to emphasize AML programs, reviewing their adequacy and compliance with the Bank Secrecy Act (BSA) and its implementing rules. This includes customer identification, independent testing, and Suspicious Activity Report (SAR) filing obligations.
9. Office of Foreign Assets Control (OFAC) Sanctions: The Division will review broker-dealers and advisers to ensure compliance with OFAC sanctions and monitoring, aiming to prevent violations of securities and other laws and regulations.

These priorities are indicative of the Division's commitment to investor protection, market integrity, and enhanced compliance. The comprehensive approach ensures that the financial landscape remains secure, resilient, and transparent for all market participants.

For registrants, investors, and the broader marketplace, this transparency provides valuable insight into the areas the Division will closely monitor in the coming year, helping stakeholders align their compliance and risk management efforts accordingly.