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ADISA Efforts Relating to SEC’s 2023 Exam Report and Exam Priorities

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Dear ADISA Members, particularly those involved in the retail distribution and sale of products such as:

  • Non-listed REITs
  • BDCs and
  • Others that have drawn interest from regulators for their cost, illiquidity and complexity

The SEC has just issued two important documents:

  • On Monday, Jan. 30, the Division released its Risk Alert on Regulation BI practices and procedures that it observed during examinations of broker-dealers.
  • On Tuesday, Feb. 7, the Division released its 2023 Examination Priorities report, which details certain practices, products, and services that the Division believes present potentially heightened risks to investors or the integrity of the U.S. capital markets.

These lengthy documents contain detailed discussions of issues that the SEC staff saw during its more recent set of examinations of broker-dealers regarding Reg BI compliance as well as issues that the Examination staff expects to focus on when reviewing (among others) broker-dealers and investment advisers relating to their sale or recommendation of alternative investments and complex instruments.

There are sections of particular importance to firms that make recommendations regarding investment products and services to "retail" customers within the meaning of Regulation BI. We believe that firms should view these reports and findings as a road map to their next SEC staff examination, particularly on the topic of Regulation BI compliance.

Acting through its Standards and Legislative & Regulatory Committees, ADISA intends to provide guidance to members who are broker-dealers and investment advisers on how to structure their operations and approaches to be more in synch with the SEC's findings and exam priorities. Look for more on this in the near future.

John H. Grady, ABR Dynamic Funds, and Catherine Bowman, The Bowman Law Firm
ADISA's Legislative & Regulatory Committee Co-Chairs