Climate and ESG
SEC will focus on environmental, social and governance (ESG) matters in light of market developments and increasing awareness in this space. The agency will look at the implications of climate change upon registrants’ operations, the consistency and adequacy of climate-change and ESG disclosures, and compliance in the context of ESG-oriented investment strategies.

Global Pandemic
The Division pivoted to focus on the most pressing risks. This includes examining whether registered firms’ business continuity plans were updated, operational and effective, and addressing increased cybersecurity and supervision risks facing firms in a remote environment.

Technology
The Division will focus on the use, implementation and integration of technology by firms to facilitate compliance with regulatory requirements. The SEC has observed that alternative data, or data gleaned from non-traditional sources, is increasingly being used by firms, including private fund advisers, as part of their business and investment decision-making processes. Reviews will include examining whether firms are implementing appropriate controls and compliance around the creation, receipt and use of such information.

Information Security
The SEC will review whether firms have taken appropriate measures to:

1. Safeguard customer accounts and prevent account intrusions, including verifying an investor’s identity to prevent unauthorized account access
2. Oversee vendors and service providers
3. Address malicious email activities, such as phishing or account intrusions
4. Respond to incidents, including those related to ransomware attacks
5. Manage operational risk due to dispersed employees in a work-from-home environment.

The Division will also focus on controls surrounding online and mobile application access to investor account information, the controls surrounding the electronic storage of books and records and personally identifiable information maintained with third-party cloud service providers, and firms’ policies and procedures to protect investor records and information. The Division will again be reviewing registrants’ business continuity and disaster recovery plans.

Reg BI
The Division will expand the scope of examinations to focus on assessing whether broker-dealers are making recommendations they have a reasonable basis to believe are in customers’ best interests and evaluating broker-dealer processes for compliance and alterations made to product offerings. The Division will also conduct enhanced transaction testing as part of these examinations and will evaluate firm policies and procedures designed to meet additional elements of Regulation Best Interest, the recommendation of rollovers and alternatives considered, complex product recommendations, assessment of costs and reasonably available alternatives, how sales-based fees paid to broker-dealers and representatives impact recommendations, and policies and procedures regarding how broker-dealers identify and address conflicts of interest.

Compliance Programs
The Division will continue to review the compliance programs of investment advisors (including whether those programs and their policies and procedures are reasonably designed, implemented and maintained), portfolio management practices, custody and safekeeping of client assets, best execution, fees and expenses, business continuity plans, and valuation of client assets for consistency and appropriateness of methodology.

The report also mentions other areas of interest by the SEC, including compliance concerns related to retail investors, including seniors and those saving for retirement, market structure and anti-money laundering (AML).