PLANADVISER - March/April 2021 - 12

The SEC Cites Its Priorities
trends
Reg BI and a focus on climate change top the list
informed consent by retail investors. "
Several
further topics on the list
relate to cybersecurity, operational
resiliency and the ongoing proliferation
and development of financial
technology innovations, including
digital assets. Notably, the SEC links
the publication of disaster-related
and climate-change-related data to
this examination priority.
" The division will continue to
review business continuity and
disaster recovery plans of firms, but
will shift its focus to whether such
plans, particularly those of systemically
important registrants, are
accounting for the growing physical
and other relevant risks associated
with climate change, " the list says.
" As climate-related events become
more frequent and more intense,
the division will review whether
firms are considering effective practices
to help improve responses to
large-scale events. The division will
also review whether registrants
have taken appropriate measures
to:
safeguard customer accounts
and prevent account intrusions,
including
verifying
THE
DIVISION of Examinations
at
the
Securities
and
Exchange Commission (SEC) has published its 2021 list
of examination priorities, offering the advisory and asset
management industry a look into the market regulator's
plans for the coming year.
Likely expected by most who follow the SEC and the
Department of Labor (DOL), a top priority is making sure
firms are complying with Regulation Best Interest (Reg BI)
and the related DOL fiduciary rule. More surprising-or
at least a newer development-is the division's enhanced
emphasis on climate change and its impact on equity
market participants.
" The division will focus on compliance with Regulation
Best Interest, Form CRS [customer relationship summary]
and whether registered investment advisers [RIAs] have
fulfilled their fiduciary duties of care and loyalty, " the
priorities statement says.
" The division will examine whether firms are appropriately
mitigating conflicts of interest and, where necessary,
providing disclosure of conflicts that is sufficient to enable
an investor's
identity to prevent unauthorized account access; oversee
vendors and service providers; address malicious email
activities such as phishing or account intrusions; respond to
incidents, including those related to ransomware attacks; and
manage operational risk as a result of dispersed employees in
a work-from-home environment. "
The SEC also announced that its enforcement staff had
secured a final judgment in the U.S. District Court for the
District of Massachusetts in a case involving Bolton Securities
Corp. Underlying the case are SEC allegations that
Bolton Securities failed to disclose material conflicts of
interest related to mutual fund 12b-1 fees and principal
trading compensation generated from client investments.
In its settlement with the SEC, it admits no wrongdoing.
As sources have suggested, such cases underscore the
fact that the SEC, even as it seeks to promote and prioritize
its rollout of the Reg BI package, continues to stress
curtailing the use of mutual fund share classes that pay a
" Rule 12b-1 fee " when a lower-cost share class for the same
fund is available to clients. -John Manganaro
12 | planadviser.com March-April 2021 Art by Klaas Verplancke
http://www.planadviser.com
PLANADVISER - March/April 2021

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