Quick Take on the SEC’s 2025 New Year’s Resolutions
Like clockwork, compliance professionals await that time in the 4th quarter when the SEC publishes its Examination Priorities for the upcoming fiscal year. This year is no different. With the fracturing political landscape and escalating foreign affairs at the top of our government’s to-do list, the SEC has now provided us with a roadmap to help navigate regulatory exams in 2025.
For Investment Advisers, there will be increased scrutiny on the application of your fiduciary duty to your clients. Are you, at all times, acting in the clients’ best interest? Have conflicts of interest been identified, assessed, mitigated, and disclosed properly? In addition, the SEC will continue to assess the effectiveness of your compliance program in accordance with 206(4)-7. Have you updated your compliance policies for changes to your business? Are your controls properly designed, monitored, and assessed? Lastly, if your firm has never been examined by the SEC, be on the lookout for an exam sooner than later.
For Private Fund Advisers, the SEC is letting you know that your disclosures should be up to date, and accurately reflect the risks associated with the private fund strategy. Specifically, the SEC will focus on interest rate exposure and how your firm handles market volatility. The usual suspects – Expense Allocation and Conflicts – remain in their sights as well. You may also want to look at rule amendments (Form PF)and updates to regulations (marketing rule).
For Investment Companies, the focus of the regulator remains steady on fund expenses, oversight of service providers, consistency of disclosures with actual practices, and how the fund handles market volatility.
For Broker Dealers, the exam focus will be on Reg-BI, Form CRS, financial responsibilities (net capital rule), trading practices, and Regulation SHO. Although these areas have been under the watchful eye of the SEC for a while now, the exam team seems to want to take a deeper dive into the application and business practices around these areas.
For Self-Regulatory Organizations, such as, National Securities Exchanges, FINRA, and Municipal Securities Rule making Board (MSRB), the SEC will ensure those organizations are fulfilling their obligations to provide governance, enforce compliance, and oversee their members.
For Clearing Agencies, annual regulatory reviews are required. The exams remain focused on risk management frame works, and the adequacy and timeliness of deficiency remediation.
Whether you are an investment adviser, broker dealer, investment company, clearing agency, or other market participant, the SEC remains focused on three main areas: Cybersecurity, Crypto, and Anti-Money Laundering. This year, they added a few additional risks that include client privacy, use of financial technologies, Regulation SCI, the shortening of the settlement cycle, and other IT-related security concerns.
Although this “roadmap” provides insight into possible exam topics for your firm, you should remain focused on the entire compliance program. Consider how changes to regulations and updates to your business have been applied to your policies. Ensure your employees have been updated to the new processes and are aware of the regulatory implications of non-compliance.
In response to the SEC's ever-evolving exam priorities, our comprehensive compliance services are designed to ensure your firm is fully prepared to meet regulatory expectations and mitigate potential risks. We provide expert guidance tailored to your unique business needs. Our team conducts thorough compliance assessments, implements robust internal controls, and offers ongoing monitoring to ensure adherence to SEC guidelines. By partnering with Gryphon Compliance, you can confidently navigate regulatory scrutiny, avoid costly penalties, and maintain the trust of your clients and stakeholders. Stay ahead of the curve with our proactive approach to SEC compliance.
Jonathan Wowak, Director of Gryphon Compliance Services LLC
He can be reached at jwowak@gryphongroup.us
