October 29, 2024 - The SEC Division of Examinations (“the Division”) recently published its 2025 Examination Priorities. The Division’s priorities include several related to investment advisers and others focused on investment companies and below we briefly summarize some of those priorities. For a deep dive on the Division’s exam priorities please see this comprehensive memo form Debevoise.
For Investment Advisers the priorities include Adherence to Fiduciary Standards of Conduct, Effectiveness of Advisers’ Compliance Programs, and Examinations of Advisers to Private Funds. The Division will also focus on advisers that have never been examined, recently registered advisers and advisers that have not been recently examined. The Division notes that examinations of registered investment companies “will generally review their compliance programs, disclosures, and governance practices. Examination focus areas may include review of specific topics or characteristics involving: (1) fund fees and expenses, and any associated waivers and reimbursements; (2) oversight of service providers (both affiliated and third-party); (3) portfolio management practices and disclosures, for consistency with claims about investment strategies or approaches and with fund filings and marketing materials; and (4) issues associated with market volatility. The Division will also continue to monitor certain developing areas of interest, such as with exposure to commercial real estate and compliance with new and amended rules.”
As Debevoise notes, despite the vacatur of the Private Funds Advisors Rule “PFAR”) by the 5th Circuit Court of Appeals, “the Priorities make clear that the SEC will continue its focus on private fund advisers.” This highlights a concern that the SEC will attempt to “regulate through enforcement” to achieve some of the policy goals that were thwarted by its loss of the PFAR litigation.
