BDIA Editors | Legal Perspectives on Current Regulatory Developments for BDs and IAs

The Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) on January 11, 2016 announced its examination priorities for this year, which “address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, [and] clearing agencies.” The priorities, as in 2015, focus on the following: protecting retail investors and investors saving for retirement; assessing market-wide risks; and using data analytics to identify elevated risk profiles and signal potential illegal activity.

In a separate letter, OCIE identified its priorities for the national securities exchanges.

On Dec. 11, 2015, the Securities and Exchange Commission (the “SEC”) issued a release proposing the adoption of new Rule 18f-4 under the Investment Company Act of 1940 (the “1940 Act”). The proposed rule, if adopted as proposed, will establish new limitations on the use of derivatives by registered investment companies and business development companies (collectively, “regulated funds”). It will also regulate other trading practices of such funds (including short sales of securities) that are deemed to involve the issuance of “senior securities.” Hedge funds and other private investment funds will not be subject to the rule.