The meme stock mania may have subsided, but the U.S. Securities and Exchange Commission (SEC) still plans to examine firms’ use of mobile apps and investor engagement techniques.
The SEC’s division of examinations announced its areas of focus for the coming year’s compliance reviews. These include emerging technologies such as robo advice, mobile trading apps and the proliferation of crypto-trading.
The regulator will examine broker-dealers and investment advisers using these fledgling financial technologies “to review whether the unique risks these activities present were considered by the firms when designing their regulatory compliance programs.”
Specifically, it plans to look at new products and practices — such as firms’ efforts to drive trading activity through digital engagement and the use of “finfluencers” — to assess whether firms have developed adequate controls and to ensure that the advice investors are receiving (including robo advice) meets conduct standards.
The SEC will also examine firms dealing in cryptoassets, including a focus on custody arrangements, advisory and trading practices, and whether firms are meeting prevailing conduct standards in this emerging segment of the market.
At the same time, it will review mutual funds and ETFs that offer crypto exposure to assess their compliance, liquidity and operational controls.
Other top priorities for the year ahead include whether firms are meeting their conduct standards in dealing with retail investors; and industry sales practices involving risky products such as SPACs, leveraged and inverse ETFs, and micro-cap securities — including compensation structures and the conflicts of interest they may create for reps.
The division will also continue to look at ESG-focused products and advice, private funds, and firms’ cybersecurity and operational resilience.