Introduction
Good morning, I’m very pleased to be here today to open the 2024 National Compliance Outreach Seminar, and have the opportunity to talk about the importance of compliance with so many dedicated financial services compliance professionals, experts, and colleagues from across the Commission. Each of you are committed to the long-term success of strengthening compliance and protecting investors. Thank you for joining us in today’s discussions designed to improve compliance by strengthening the lines of communication between the SEC and compliance professionals. [1]
I also want to both acknowledge and thank Mavis Kelly and her team within the Division’s National Exam Program Office (NEPO). Without their work, today’s National Compliance Outreach Seminar would not be possible. And to thank Susan Weis and Kevin Stemp of my office, for their assistance in preparing today’s remarks.
We’ve faced several years marked by a great deal of tumult and change where our markets and investors have faced a pandemic, geopolitical instability, inflation and widespread cyber threats, as well as the opportunities and challenges presented by a more diffuse work force – making discussions such as the one today all the more important.
My comments today will discuss how we in the SEC’s Division of Examinations (EXAMS) are furthering the Division’s mission to strengthen compliance and investor protection, as well as improving our communication with registrants to help promote a sound culture of compliance at your firms.
Before I begin my remarks, however, I need to share a disclaimer that this speech is provided in my official capacity as the Commission’s Acting Director of the Division of Examinations, but does not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff.
The Challenge of Change
The Division of Examinations supports the SEC’s tripartite mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. We oftentimes speak of the Division’s mission through the lens of what we refer to as our Four Pillars, which emphasizes our work to (1) promote compliance; (2) prevent fraud; (3) monitor risk; and (4) inform policy.
EXAMS has a unique mission and role at the Commission. We’re responsible for conducting examinations of financial entities that are required by law to register with the Commission. These registrants include a truly diverse set of financial market participants, including investment advisers, investment companies, broker-dealers, exchanges, FINRA, the MSRB, transfer agents and clearing agencies, among others—we cover a very broad waterfront.
In today’s market environment, not only are we conducting examinations in traditional areas, but we’re also examining for compliance with newly effective rules, looking ahead to changes in technology, dealing with some of the same cyber issues that each of you face every day, and considering the implication of recent advances in crypto assets and artificial intelligence.
In March, we’ll mark our Division’s 30th anniversary, and as we approach this milestone, it’s helpful to spend a moment reflecting on how far we’ve come. There have been immense changes since we were formed in 1995—then known as the Office of Compliance Inspections and Examinations (OCIE).
Just in the past several years, we’ve seen a tremendous change in how both clients and professionals interact—the pandemic accelerated a shift from offices towards a more mobile, distributed business model. Clients meet virtually with their investment professionals from the convenience of their own homes and make investments in our capital markets from a computer, tablet, or smartphone. Consumers now have access to smart portfolios with dynamic rebalancing and fully automated algorithmic trading. And while these innovations are both transforming and democratizing finance—making it more affordable and accessible than ever before—they also pose challenges as we all strive to ensure robust compliance and investor protection.
When compared to the industry we examine, we are a fraction of a vast landscape and must leverage all tools at our disposal—including technology and communications to increase efficiency and effectiveness and ensure that industry professionals—such as all of you here today—are empowered to help provide the protection that investors rely and depend upon.
A Shared Interest in Protecting Investors
My message to you today is that opportunities like we have at this seminar and at similar outreach events across the country throughout the year, where we can discuss compliance issues in a practical way, are both important and mutually beneficial. Together we can share our experiences and promote effective compliance practices, so that you—like us—remain effective in your mission. Our examinations, coupled with your effective compliance programs, are essential elements of our collective shared interest in investor protection and preserving market integrity.
I think it is worth taking a moment to emphasize how essential all of your compliance efforts are to protecting investors. We cannot be everywhere all at once. Strong investor protection requires empowered compliance professionals and strong cultures of compliance within firms.
Promoting compliance is in our DNA. Not only is it one of the four pillars of our Division it is an important focus of our work. We recognize that a vital component of our mission is promoting and supporting compliance functions at our regulated entities. Our examinations go hand-in-hand with your robust compliance programs. Given our size relative to the markets we examine, effective industry compliance is essential to protecting investors and our work to promote and strengthen these compliance efforts is critical.
Communicating to Promote and Strengthen Compliance
One of the ways we promote and strengthen compliance is through our communications. Starting last year, we shifted the publication of our annual examination priorities to earlier than ever before. By announcing our priorities earlier, we are more closely aligned with the fiscal year, which drives our work, transparency and messaging. Publishing our priorities earlier also allows us to reach CCOs and compliance professionals prior to calendar year end—which we know effects internal planning and budgeting discussions at many registrants. A lot of time and effort goes into the creation of our annual priorities document, which we published two weeks ago. I encourage you to read the Fiscal Year 25 Priorities thoroughly and to carefully consider them in relation to your planning and the tailoring of your compliance program to your business and risks.
There is another important communication channel that I also want to highlight. The Division is active in publishing risk alerts. Since 2011, we have periodically issued risk alerts (many of you will already be familiar with these)—now totaling over 70 separate publications, covering a wide array of topics across our program areas. Our risk alerts raise awareness of compliance and industry risks and are meant to encourage firms to think about their own policies and procedures in particular areas.
By communicating about risks we observe during examinations in a synthesized and anonymized form, our risk alerts allow us to share key observations outside the context of an examination, so that firms can proactively assess whether they need to strengthen their compliance programs.
We also actively seek opportunities for outreach to communicate and engage with investors, registrants and compliance professionals to raise awareness and promote compliance through participation in regional and national seminars, workshops, conferences and events like today.
By communicating our annual priorities, periodic risk alerts, and at outreach events across the nation, we aim to create a roadmap for strengthening compliance and investor protection, and seek to empower compliance professionals to lead discussions about enhancing compliance within their firms. We are always pleased when we hear CCOs say they are able to point to our communications during their internal discussions about budgets and resource allocations, because we share an interest in ensuring investors benefit from robust compliance and protections.
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I want to recognize and thank all the CCOs and compliance professionals for joining us today and for your commitment and work to promote and strengthen compliance within your firms and across the industry. We share a common commitment to protecting our nation’s savers and investors, and look forward to our continued work to advance this mission, together.
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[1] This speech is provided in the author’s official capacity as the Commission’s Acting Director of the Division of Examinations, but does not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff.
