U.S. Securities and Exchange Commission headquarters in Washington, D.C. Photo: Diego M. Radzinschi/ALM

Looking forward to 2019, the Securities and Exchange Commission's Office of Compliance Inspections and Examinations said in a report released earlier this month that its examination priorities include digital assets, cybersecurity and anti-money laundering efforts.

“These priorities reflect OCIE's assessment of certain risks, issues, and policy matters arising from market and regulatory developments, information gathered from examinations, and other sources, including tips, complaints, and referrals, and coordination with other regulators,”  the report states.

As both consumers and members of industry call for federal legislation on data privacy and cybersecurity, OCIE says in the report that cybersecurity is critical to protecting the financial markets. The report says that OCIE will focus on cybersecurity in each of its five program areas. Those areas are investment adviser/investment company; broker-dealer and exchanges; clearance and settlement (OCS); FINRA and securities industry oversight, and the technology controls program (TCP).

“OCIE is working with firms to identify and manage cybersecurity risks and to encourage market participants to actively and effectively engage in this effort,” the report says.

Examinations in cybersecurity will focus on areas such as proper configuration of network storage devices, information security governance and policies and procedures related to retail trading information security.

Further, the report states that OCIE will give a greater focus to digital assets. In 2018, the SEC has issued fines for not registering to advertise with digital currencies and has filed suit against a cryptocurrency company for claiming an initial coin offering had SEC backing.

“In particular, through high level inquiries, OCIE will take steps to identify market participants offering, selling, trading, and managing these products or considering or actively seeking to offer these products and then assess the extent of their activities. For firms actively engaged in the digital asset market, OCIE will conduct examinations focused on, among other things, portfolio management of digital assets, trading, safety of client funds and assets, pricing of client portfolios, compliance, and internal controls,” the report states.

OCIE also will continue to make sure that broker-dealers are in compliance with the Bank Secrecy Act, which requires broker-dealers to establish anti-money laundering program.

“The goal of these examinations is to ensure that broker-dealers have policies and procedures in place that are reasonably designed to identify suspicious activity and illegal money laundering activities,” the report states.