Ali Abbas
What is the SEC’s Division of Examinations?
The SEC’s Division of Examinations (formerly OCIE) is the primary regulatory institution responsible for SEC examinations to ensure companies are compliant and transparent with the public.
The Division of Examinations is a branch of the Securities and Exchange Commission (SEC) that aims to ensure market integrity and protect investors. The Division is the main entity responsible for conducting the SEC’s National Exam Program. It is the second largest Division in the SEC, behind the Division of Enforcement. As of December 2020, the OCIE has been renamed the Division of Examinations.
History of the OCIE
The OCIE was created on May 1st, 1995 by the SEC. The SEC aimed to consolidate the examinations and inspections into one Division within the SEC. With this new distinct division, the SEC could streamline and improve their examinations. The three primary examination areas of the SEC were:
- Brokers/Dealers (B/D)
- Self-Regulatory Organizations (SRO)
- Investment Advisers/Investment Companies (IA/IC)
The SEC has been conducting examinations for over 25 years. These examinations are put in place to protect investors and ensure market integrity. As the OCIE transitions into the Division of Examinations, examinations will continue to improve in quality and make sure the American public markets are fair and transparent.
The mission of the Division
The Division of Examinations has a mission that comprises three pillars:
- To protect investors
- To ensure market integrity; and
- To support resonsible capital formation through risk-focussed strategies
The Division aims to ensure that these strategies:
- Improve compliance
- Prevent Fraud
- Monitor risk; and
- Inform policy
What does the Division do?
The SEC’s Division of Examinations ensures a physical presence among market participants and is the Division that conducts on-premise visits and examinations of regulated firms. It publishes frequent risk alerts, that highlight to the market where its focus may lie.
The Division is responsible for the implementation and improvement of an exam program that is risk-based. It does this by collecting data from all SEC registrants, analysing it and using modern techniques to make risk-based analyses.
The Division is split into distinct offices in order to carry out its exam program. These include, but are not limited to:
- The Office of Risk and Strategy (ORS), which conducts risk assessment, quantitative analysis, large firm monitoring and market surveillance.
- The Broker-Dealer and Exchange (BDX) Examination Program, which conducts examinations of broker-dealers, national securities exchanges, transfer agents, municipal advisors, the Public Company Accounting Oversight Board and the Securities Investor Protection Corporation.
- The Investment Adviser/Investment Company (IA/IC) Examination Program, which examines investment advisers and investment companies, such as mutual funds and exchange-traded funds.
Key examination types
The Division of Examination’s is able to examine financial services to examine compliance systems and processes. It carries out three distinct types of examinations:
- Routine: examinations that occur periodically to ensure compliance.
- For cause: examinations prompted by a tip from an investor, employee, or other individual that shows a company is violating OCIE compliance measures.
- Sweep: Industry wide examinations that occur to ensure compliance. These occur with little to no warning.
