The U.S. SEC has released its Examination Priorities for the fiscal year 2025, offering a detailed guide for CCOs to evaluate and enhance their compliance frameworks.
According to MCO, (MyComplianceOffice), this document outlines the critical areas and evidentiary requirements that regulators will focus on during their examinations, helping firms ensure they have robust policies, procedures, and controls in place.
In addition to these forward-looking guidelines, firms should review the SEC’s Enforcement Results from 2024 for further insights. The previous year marked a record in enforcement intensity, with the SEC filing 583 enforcement actions and imposing financial remedies totaling $8.2bn, the highest in its history. Notably, a single case accounted for $4.5bn of this total, marking it the largest fraud action ever taken by the agency.
A focal point of the SEC’s enforcement strategy has been off-channel communications, with over 70 firms facing upwards of $600m in penalties. The comprehensive enforcement covered a variety of violations, including inadequate compliance programs, insufficient disclosures, and numerous forms of fraudulent activities such as Ponzi schemes and insider trading.
Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, emphasized the value of proactive compliance and self-reporting. He noted that robust engagement in these practices could significantly mitigate penalties. The SEC encourages firms across the board—from public companies to advisory firms—to adopt a proactive stance on compliance and to cooperate fully with regulatory inquiries.
Looking ahead to 2025, the SEC Division of Examinations will continue its rigorous oversight across various market participants. Investment advisers will be scrutinized for their adherence to fiduciary standards, ensuring their advice is suitable and their disclosures are transparent and comprehensive. Newly registered advisers and those who have not been recently examined will be particular focuses.
For registered investment companies, which play a pivotal role for retail investors, the SEC will examine the robustness of their compliance, disclosure, and governance frameworks. This includes a review of their management practices, fee structures, and how they handle market volatility.
Broker-dealers will face rigorous reviews focusing on compliance with Regulation Best Interest (Reg BI) and the handling of customer relationship summaries (Form CRS). Their operational resilience and third-party management will also come under scrutiny.
Additionally, the Division will evaluate the compliance infrastructure and risk management strategies of other entities like national securities exchanges and municipal advisors, ensuring they adequately protect customer assets and information.
The risk landscape for 2025 also includes a sharp focus on cybersecurity and the management of operational risks, with particular attention to firms’ use of emerging technologies like artificial intelligence and their involvement with crypto assets. The SEC aims to ensure that firms not only provide accurate and fair information to investors but also maintain stringent controls over their technological and operational processes.
Anti-money laundering (AML) measures will also be a significant area of focus, particularly for broker-dealers and certain registered investment companies. The SEC will assess whether AML programs are adequately tailored to the risks posed by the firm’s operations, including the effectiveness of their customer identification programs and their compliance with sanctions and other regulatory requirements.
The SEC’s 2025 Examination Priorities document underscores the critical importance of a sound, robust compliance program across all areas of operation, highlighting that regular reviews are essential for identifying and addressing potential conflicts of interest and ensuring compliance with regulatory norms.
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