On February 7, 2023, the Division of Examinations of the US Securities and Exchange Commission (the “Division” and the “SEC,” respectively) announced its examination priorities for 2023. This year, the Division identified new and significant focus areas including: (i) recently adopted rules under the Investment Advisers Act of 1940 and Investment Company Act of 1940; (ii) registered investment advisers to private funds; (iii) Regulation Best Interest (“Reg BI”) and fiduciary duty; and (iv) Environmental, Social and Governance (“ESG”) investing.
Many of the areas highlighted by the Division align with industry expectations based on the guidance provided by the SEC in the recent years. Over the past two years, the Division has published 16 risk alerts sharing insights and observations from examinations on various key topics such as digital assets, amended Rule 206(4)-1 under the Advisers Act (the “Marketing Rule”) and Reg BI. The Division’s focus on the Marketing Rule initiative, in particular, is not surprising given that it is a major change for advisers in the advertising and communications space and is widely considered one of the most significant changes for investment advisers in recent times. In addition, the regulatory regime for Reg BI has matured, and broker-dealers should expect enhanced examinations.
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