Statement Summary
The press release discusses efforts by the SEC’s Division of Examinations to enhance the examination process for regulated entities, emphasizing the importance of clear communication, accessibility, and collaboration. It highlights the SEC’s commitment to transparency through annual priorities, risk alerts, and outreach events, promoting proactive compliance. Registrants are encouraged to engage with the examination team, ensuring professional interactions and open dialogue during audits. The speaker underscores mutual respect and the shared goal of protecting investors through strong compliance practices, noting that successful examinations stem from good cooperation and communication. Overall, the message conveys a commitment to continuous improvement in regulatory practices and responsiveness to industry feedback.
Original Statement
Thank you for inviting me here today. It is always a privilege to engage with so many dedicated compliance professionals. While we come from many different organizations and many different roles, we share a common goal – promoting strong compliance programs that protect investors and support fair orderly and efficient markets. Those capital markets, America’s capital markets, are the largest and most liquid in the world. Their rise and continued expansion can certainly be attributed in part to our country’s embrace of innovation, the indomitable spirit of American entrepreneurs, and our dynamic democracy. But it is important to remember that beneath those more ephemeral aspects of our capital markets lies a robust regulatory ecosystem that facilitates certainty, stability, and a level-playing field for investors and regulated entities alike.
Congress and the Commission set expectations for regulated entities through statute and regulation. To operate within that framework, is to benefit from the confidence, legitimacy, and trust that comes with being a regulated entity. But that benefit also carries a corresponding responsibility – the requirement to meet the legal and regulatory obligations that sustain that trust. Congress understood that a regulatory framework cannot rest on expectations alone. For the framework to have meaning, there must be a means of ensuring that the requirements operate as intended. That is, in part, why Congress entrusted the Commission and its staff with the authority to examine the books and records of registrants to assess their compliance with the obligations that underpin our markets.
What we do in the Division of Examinations is a manifestation of that fundamental aspect of capital market regulation. So, while an examination may not always be the most welcome part of being a regulated entity, it is an essential part of the bargain of operating within a system built on trust, accountability, and the rule of law. But just because it is necessary doesn’t mean it is perfect. So, what I would like to chat with you about today is the Division’s efforts to improve the examination process and your role in helping us do so.
Key Initiatives for Improvement
We intend to build on the foundation laid by prior generations of examiners in seeking to ensure that the Division is operating in a way that is both ACCESSIBLE and INTEGRATED.
At a time when conversations seem to increasingly involve discussions of frontier models, explainability, transformers and tokens, I’d offer that our approach in this space is grounded in something a little more simple and foundational – and that is the so-called “Golden Rule.” It may sound trite, but we should treat others as we would like to be treated.
Annual Priorities
First, we seek to promote transparency by publishing our annual priorities. We share these priorities to encourage proactive compliance and clarity. During their development, we actively seek input from many stakeholders and industry groups. After collecting and evaluating all feedback, we carefully consider the information and conduct analysis before publishing our priorities so registrants can understand our main concerns and prepare more effectively for examinations.
Compliance Outreach
Additionally, we have become more intentional in holding regular outreach events. Over the last year we held a series of events to help investment advisers, broker-dealers, and transfer agents prepare for compliance with amendments to Regulation S-P. We will continue to host these seminars which enable CCOs and other senior officers to gain information directly from their local SEC offices.
Risk Alerts
To help communicate the risks we see through our work, we regularly publish risk alerts. These documents cover a variety of examination topics and inform registrants of risks and examination observations in specific areas that the Division has identified.
Responding to Industry Feedback
Our Division also actively engages with industry groups. We encourage robust dialogue; if you believe an observation or deficiency is unwarranted, the exit conference is an excellent occasion to raise your concerns.
Enhanced Internal Communication
We are broadening our approach by not only better connecting with regulated entities, but also working to enhance our interoperability with other SEC divisions, particularly those responsible for policy development.
Conclusion
At the end of the day, we have an important common goal: protecting investors and promoting strong compliance practices. The best examinations are those where we can have open and constructive conversations, where firms feel comfortable explaining their business, and where we can work together to address issues and identify opportunities for improvement.
Thank you for the work you do and for your time this morning. We look forward to continuing the dialogue.
