2024 has just wrapped up as I write this blog; and while the industry is waiting to see how changes at the helm of the SEC may influence priorities, there are a few items that are likely to remain on the agency’s radar in 2025.
The SEC recently published a Risk Alert noting that many fund companies have deficiencies in documentation and disclosure practices. Recent exam sweeps have found that fund registration statements, fact sheets, and annual reports contained incomplete, outdated, or potentially misleading information, and sales materials contained untrue statements and omission of facts.
The SEC is in the process of completing an audit of the regulator’s rulemaking process and are expecting that they will see increased litigation about future rulemakings.
The SEC released its 2025 examination priorities. Outsourcing to third parties and the use and disclosure of AI will likely be areas of focus.
The SEC’s new Alert covers the following areas:
- How funds are selected for examination
- Observations from exams conducted
- Funds’ compliance programs
- Fund disclosures and filings
- Fund governance practices
The SEC is alerting firms to focus on areas of weaknesses found during exams regarding the above topics, including the following:
- Regulatory filings with missing or misleading statements
- Sales materials with untrue statements or omissions of material fact
- Poorly written policies and procedures that do not cover the fund-specific risks or are too broad and not customized to the fund
- Weak Codes of Ethics that are not followed by employees/access persons
- Lack of adequate fund board oversight or documentation regarding the oversight practices, especially related to the advisory agreement approval process
It is especially important to note that misleading marketing/sales materials and missing or misleading disclosures continue to be a focus for firms in the new year. As you plan to prepare your compliance programs, please keep in mind that Saifr offers solutions to help firms manage the marketing and disclosures regulatory challenges firms face. Please learn more here on our website.
The opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.
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