The Division of Examinations of the U.S. Securities and Exchange Commission (SEC) took an unprecedented step this fiscal year, announcing its 2024 Examination Priorities (2024 Priorities) at the beginning of the fiscal year for the first time. This novel approach likely showcases the Division’s ambition to be highly active over the next 12 months with the aim to provide registrants and other market participants more breathing room to address potential areas of concern. This article is written with insights from Venable LLP.
While the complete text of the priorities list hasn’t been released to the public, the early announcement provides an indication of the Division’s emphasis on proactive governance and its commitment towards encouraging and fostering transparent and compliant practices within the industry. This modus operandi aligns with the Division’s sustained focus on protecting investors, facilitating capital formation, and ensuring fair and efficient markets.
The details of the 2024 Priorities will presumably reflect the SEC’s continual focus on several key areas, such as compliance programs, custody protocol, best execution delivery, digital assets, mutual funds and exchange-traded funds risks, as well as disclosure of conflicts of interest to clients. These areas have been repeatedly addressed in previous years’ priorities, symbolizing the SEC’s long-standing commitment to these issues.
With the Division’s early announcement of the 2024 Priorities, firms have the opportunity to examine their compliance programs and address any potential areas of concern. It’s still a matter of speculation whether the Division will adopt this early-announcement model in the future, but the impact on the industry in terms of preparedness could be noteworthy.
To stay abreast with the SEC’s examination practices and sprawl, corporations and law firms will benefit immensely from conducting an ongoing review of their operations and governance practices, while focusing on areas that might stand up to potential regulatory scrutiny. Firms have to continue their vigilance in maintaining high-standard compliance programs and risk management systems to meet the Division’s increasing requirements and the rapidly evolving regulatory landscape.
Further information on the details of the 2024 Priorities will be forthcoming with the official SEC´s Division of Examinations publication.