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The Securities and Exchange Commission (SEC) recently released its 2024 Examination Priorities report which sheds light and offers guidance on the SEC’s regulatory focus for the upcoming fiscal year. With a history spanning over a decade, this report serves as a valuable guide for market participants, offering insights into the SEC’s examination agenda and areas of heightened scrutiny. Looking at this year’s Examination Priorities report, we see notable differences from last year and key trends emerging from this latest release.
Purpose of the Examination Priorities Report
The Examination Priorities report outlines the SEC’s focal points for the fiscal year, providing a roadmap for the agency’s examination division. While this report specifically addresses the examination division, it’s important to note that all divisions within the SEC collaborate closely. Consequently, the report offers some insight into the SEC’s organizational priorities, including enforcement and regulatory initiatives.
This year’s report is particularly noteworthy for its early release date. The accelerated publication timeline allows market participants to gain a timelier understanding of the SEC’s focus areas, though core initiatives from the prior year continue.
Notable Differences from 2023
Comparing the 2024 report with 2023 reveals some notable shifts in priorities. One of the most notable differences is the absence of explicit mention of Environmental, Social, and Governance (ESG) funds, products, and advisors. While this might suggest a diminished emphasis, recent SEC rule updates on greenwashing and potential forthcoming regulations on ESG disclosure indicate that ESG considerations remain on the SEC’s radar.
Regulation Best Interest (RegBI), a topic highlighted in previous reports, is prominently featured in the 2024 priorities. The enhanced focus on RegBI aligns with the SEC’s commitment to elevating standards of conduct and fiduciary interpretation.
For the first time, the report explicitly addresses risks associated with Artificial Intelligence (AI) and emerging technologies. This underscores the SEC’s awareness of the evolving landscape and potential challenges advanced technologies pose in the financial markets which was emphasized by SEC Chair Gary Gensler in July when he spoke about AI playing a “central role in the after-action reports of a future financial crisis.”
Key Trends from the 2024 Report
The 2024 report reveals a continuation of some key trends from the 2023 priorities. Anti-Money Laundering (AML) remains a top concern, with an explicit elevation in focus. The SEC emphasizes the need for banks to implement appropriate AML programs tailored to their size and operations.
Crypto assets’ risks and volatility, a focal point in 2023, persist as a prominent theme in the 2024 report. The SEC maintains its vigilance in assessing the evolving landscape of crypto assets and associated market activities.
Information security (Infosec), operational resiliency, and Regulation Systems Compliance and Integrity (Reg SCI) remain paramount concerns. These areas align with global regulatory trends, demonstrating the SEC’s synchronization with international counterparts in addressing critical market infrastructure and cybersecurity challenges.
The SEC’s 2024 Examination Priorities report provides valuable insights into the regulatory landscape, offering market participants a roadmap to navigate the evolving financial environment. As the SEC adapts to emerging risks and technological advancements, market participants and industry stakeholders should remain vigilant and align their practices with the outlined priorities to help ensure compliance and resilience in a dynamic marketplace.
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