This document provides an overview of the 2020 priorities for various financial regulatory bodies that oversee depository institutions and broker dealers. Some common themes across regulators include enhanced focus on cybersecurity, anti-money laundering compliance, LIBOR transition, CECL implementation, and oversight of new technologies. Specific priorities mentioned include risk management, governance, liquidity risk, and credit underwriting practices for depositories, and market integrity, information security, and protection of retail investors for broker dealers.

1. 2020
Priorities for
Depositories
and Broker
Dealers.
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3. Table
of Contents
4
• Overview
5 Depository Institutions
5 Federal Deposit Insurance Corporation (FDIC)
6 Office of the Comptroller of the Currency (OCC)
7 National Credit Union Administration (NCUA)
7 Consumer Financial Protection Bureau (CFPB)
7 Federal Reserve Board (FRB)
8
• Broker Dealers or Other Securities
and Derivatives Markets Intermediaries
8 Securities and Exchange Commission (SEC)
9 Commodity Futures Trading Commission (CFTC)
9 Financial Industry Regulatory Authority (FINRA)
10 Municipal Securities Rulemaking Board (MSRB)
10 National Futures Association (NFA)
12
• How Sia Partners Can Help You
13
• Contact Us
13
• References
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4. Overview.
Each year markets evolve, compliance obligations grow, and the risk and potential
harm to investors increases. Keeping up with continuous change can be difficult
and time consuming. Let Sia Partners help you stay compliant and mitigate risks to
your company and clients in 2020!
Sia Partners has reviewed and consolidated the 2020 priorities for Depository
Institutions, Broker Dealers, and other Securities and Derivatives Markets Inter-
mediaries, with the corresponding regulatory authorities, to enhance transparency
and provide insight into their approach.
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5. Depository
Institutions.
Regulation of Depository Institutions is driven by multiple regulatory bodies in va-
rying jurisdictions. The dual banking system, in which Depository Institutions are
subject to regulation, is governed by state and / or federal jurisdictions. Each rele-
vant regulatory body has provided priorities for 2020 with a few common themes:
● Bank Secrecy Act/Anti-Money Laundering (BSA/AML) – Increased scrutiny on
customer due diligence and beneficial ownership; risk management systems
matching the complexity of business models and products offered; technology
solutions; and adequacy of suspicious activity monitoring and reporting systems
/ processes.
● Cybersecurity – Advancements in technology and the increased use of mobile
technology for financial transactions creates greater risk and more opportunity
for cybersecurity threats.
● Current Expected Credit Losses (CECL) – Examiners will continue to focus
on the accounting standard, including bank implementation plans and use of
third-party vendors to assist in methodology, modeling, and management infor-
mation systems development.
● London Interbank Offering Rate (LIBOR) – The UK’s Financial Conduct Authority
has announced that it cannot guarantee LIBOR’s availability beyond the end of
2021.
Federal Deposit Insurance
Corporation (FDIC)
● Risk Management Governance
Frameworks – Assessing the
effectiveness of the risk mana-
gement practices of an FDIC-su-
pervised insured depository ins-
titution continues to be a critical
part of the FDIC’s forward-looking
and risk-focused supervision.
● Board and Management Over-
sight – A sound lending program
begins with the direction and
oversight of the insured depo-
sitory institution’s (IDI) board of
directors and senior manage-
ment. Over 56% of reviews from
a two-year assessment of FDIC
monitored IDI’s yielded supervi-
sory recommendations regarding
board/management oversight,
with roughly 27% of that pool with
supervisory recommendations in-
cluded Matters Requiring Board
Attention (MRBA).
● Portfolio-Level Sensitivity Ana-
lyses – An insured depository
institution should, “consider the
size and potential risks of mate-
rial asset concentrations,” and,
“provide periodic asset reports
with adequate information for
management and the board of
directors to assess the level of
asset risk.”
● Portfolio Management – Super-
visory recommendations regar-
ding portfolio management were
evident in 37% of the reviews;
over 28% of that pool involved
MRBA. Portfolio monitoring
emerged as a more common su-
pervisory recommendation, with
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6. the MRBA primarily centered on
establishing and monitoring limits
for concentrations and pertinent
sub-segments.
● Funding Strategies – Over 11% of
the reviews of CRE concentrated
FDIC-supervised IDIs yielded a
liquidity component rating of “3”
or worse. Further, over 28% of
the reviews reported superviso-
ry recommendations regarding
portfolio funding strategies, with
over 45% of that subset contai-
ning MRBA. The more common
supervisory recommendation
themes centered on improve-
ments needed in the monitoring
of funding sources supporting
the CRE loan portfolio and its
growth. Other common themes
were weaknesses in liquidity sen-
sitivity analyses and contingency
funding planning.
● Underwriting – The Interagency
Safety and Soundness Standards
require insured depository insti-
tutions to establish and maintain
prudent credit underwriting prac-
tices that, “Provide for considera-
tion, prior to credit commitment,
of the borrower’s overall financial
condition and resources; the fi-
nancial responsibility of any gua-
rantor; the nature and value of any
underlying collateral; and the bor-
rower’s character and willingness
to repay as agreed.”
Office of the Comptroller
of the Currency (OCC)
● Cybersecurity and Operational
Resiliency – Emphasis on threat
vulnerability and detection, ma-
naging third-party connections,
access controls and data mana-
gement. Examiner focus should
include information technology
risk management evaluation and
institutions’ information technolo-
gy systems maintenance.
● BSA / AML – With emphasis
on customer due diligence and
beneficial ownership; determi-
ning whether BSA / AML risk
management systems match the
complexity of business models
and products offered; evaluating
technology solutions to perform
or enhance BSA / AML oversight
functions; and assessing the ade-
quacy of suspicious activity moni-
toring and reporting systems and
processes.
● Commercial and Retail Un-
derwriting Practices – Focus on
evaluating credit risk appetites,
risk layering, and portfolio risk
exposure.
● Commercial and Retail Credit
Oversight and Control Functions
– Including portfolio administra-
tion and risk management, inde-
pendent loan review, concentra-
tion risk management, policy
exception tracking, collateral
valuation, stress testing, and col-
lections management.
● Impact of Changing Interest Rate
Outlooks – On bank activities and
risk exposures, including deposit
costs, funding migration, asset
valuations, borrower debt service
capacity, and housing affordability.
● CECL – Accounting standard,
including bank implementation
plans and use of third-party ven-
dors to assist in methodology,
modeling, and management in-
formation systems development.
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7. ● Preparation for the Potential
Phase Out of the LIBOR – As a
reference rate after 2021, inclu-
ding impact assessments, corre-
lated risk assessments, vendor
management, and change ma-
nagement related to the imple-
mentation of an alternative index
for pricing loans, deposits, other
products and services, as well
as operational and compliance
risks.
● Technological Innovation and
Implementation – The use of
new products and services such
as cloud computing, artificial
intelligence, digitalization in risk
management processes.
National Credit Union
Administration (NCUA)
● BSA / AML – NCUA examiners
conduct a BSA / AML review du-
ring every examination and take
appropriate action, when neces-
sary, to ensure credit unions meet
their obligations.
● Consumer Financial Protection –
Compliance with consumer finan-
cial protection regulations is eva-
luated during every examination.
The scope of the consumer com-
pliance reviews are risk-focused,
based on each credit union’s
compliance record, products and
services provided, and any new or
emerging concerns.
● LIBOR – The UK’s Financial
Conduct Authority has an-
nounced that it cannot guarantee
LIBOR’s availability beyond the
end of 2021. Credit unions both
offer and own, and are counter-
parties to, LIBOR-based products
and contracts. Examples include
loans, investments, derivatives,
deposits, and borrowings. These
may be subject to increased legal,
financial, and operational risks
once this reference rate is no lon-
ger available.
● CECL – Although the Financial
Accounting Standards Board
granted a one-year delay (until
January 2023) for credit unions
to comply with its new current
expected credit losses (CECL)
standard, examiners will conti-
nue to discuss their plans to im-
plement CECL with credit union
managers.
● Liquidity Risk – Examiners will
review credit union liquidity ma-
nagement and planning. In parti-
cular, for credit unions with low le-
vels of on-balance sheet liquidity,
examiners will assess liquidity
management by evaluating:
● Potential effects of changing
interest rates on the market value
of assets and borrowing capacity;
● Scenario analysis for liquidity
risk modeling, including pos-
sible member share migrations
(e.g. shifts from core deposits
into more rate-sensitive ac-
counts). Also, scenario analysis
for changes in cash flow projec-
tions for an appropriate range of
relevant factors (e.g., changing
prepayment speeds);
● And the appropriateness of
contingency funding plans to
address any potential liquidity
shortfalls.
● Cybersecurity – Cyber-attacks
continue to pose a threat to the fi-
nancial system. Advancements in
technology and the increased use
of mobile technology for financial
transactions creates greater risk
and more opportunity for cyber-
security threats.
● Credit Risk – Examiners will place
emphasis on the review of the
credit union’s loan underwriting
standards and procedures. In
particular, examiners will verify if
credit unions properly analyzed
the ability of borrowers to meet
debt service requirements wit-
hout undue reliance on the value
of any collateral.
Consumer Financial
Protection Bureau (CFPB)
● CCPA Implementation – The
California Consumer Privacy Act
(CCPA) went into effect January 1,
2020. The law aims to give consu-
mers knowledge and control of
their personal information by de-
termining what data is collected,
how companies use that data, and
how to stop that use.
● CFPB Final Debt Collection
Rules – The wait for the CFPB
final rules for debt collection will
finally be over and are set to be
released in 2020.
● CFPB Time-Barred Debt Disclo-
sure Supplemental Notice of Pro-
posed Rulemaking (NPRM) – The
CFPB suggested a supplemental
NPRM for time-barred debt dis-
closures early 2020. A portion of
the time-barred debt section of
the NPRM was left blank and the
CFPB has also conducted consu-
mer surveys on disclosures.
● Pending Pivotal Court Decisions
– In 2020 pivotal court decisions
will be addressed, and it will be
important to track.
● Courts are Calling Out FDCPA
Abuse by Consumers and Their
Counsel – It also appears that
the tide is turning in the courts on
Fair Debt Collection Practices Act
(FDCPA) cases as more judges
begin to call out plaintiffs’ and
their counsel’s misuse of the Act.
Federal Reserve Board
(FRB)
● Capital – Supervisory priorities
include practices supporting
stressed loss / revenue forecas-
ting, underwriting standards, cre-
dit risk management and CECL
implementation.
● Liquidity – Including internal li-
quidity stress test assumptions,
liquidity position, risk manage-
ment and governance.
● Governance and Controls – Fo-
cusing on operational resilience,
information technology and com-
pliance risk management, internal
audit, and LIBOR.
● Recovery and Resolution Plan-
ning – Large Institutional Super-
vision Coordinating Committee
(LISCC) domestic firm and LISCC
foreign bank IHC resolution plans;
preparation for LISCC firm targe-
ted resolution plans; and recovery
planning.
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8. Broker Dealers
or Other Securities
and Derivatives
Markets
Intermediaries.
For regulatory purposes, securities
markets can be divided into deriva-
tives and other types of securities.
Standard-setting bodies and other
self-regulatory organizations (SROs)
are overseen by the SEC or the CFTC.
Each regulatory body and SRO has
provided priorities for 2020 with the
below themes:
● Cybersecurity / FinTech Innovation
– Ever-changing innovations and
advancements in financial techno-
logies, methods of capital forma-
tion, market structures, and investor
interfaces cause for substantial risk
and more opportunity for cyberse-
curity threats.
● Market Integrity / Information – Fo-
cus has been on detecting, investi-
gating, and prosecuting misconduct
that may undermine the integrity
of the markets as well as the firms’
compliance ongoing obligations.
Securities and Exchange
Commission (SEC)
● Retail Investors (Retirement) –
Office of Compliance Inspection
and Examinations (OCIE) will
again emphasize the protection
of retail investors.
● Information Security – OCIE will
continue to prioritize information
security (proper configuration
of network storage devices, in-
formation security governance
generally, and retail trading infor-
mation security) in each of its five
examination programs.
● FinTech Innovation – Examina-
tions will focus on firms’ use of
data sets and technologies to in-
teract with and provide services
to investors, firms, and other ser-
vice providers and assess the ef-
fectiveness of related compliance
and control functions.
● Registered Investment Advisors
(RIAs) and Investment Co. – OCIE
typically assesses compliance
programs of RIAs in one or more
core areas, including the appro-
priateness of account selection,
portfolio management practices,
custody and safekeeping of client
assets, best execution, fees and
expenses, and valuation of client
assets for consistency and appro-
priateness of methodology.
● Broker Dealer and Muni Advi-
sors – In addition to the afore-
mentioned areas focusing on
sales practices, broker-dealer
examinations will also focus on
the safety of customer cash and
securities, risk management, cer-
tain types of trading activity, the
effects of evolving commissions
and other cost structures, best
execution, and payment for order
flow arrangements.
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9. ● AML – OCIE will continue to prio-
ritize examining broker-dealers
and investment companies for
compliance with their AML obli-
gations in order to assess, among
other things, whether firms have
established appropriate cus-
tomer identification programs and
whether they are satisfying their
SAR filing obligations, conducting
due diligence on customers, com-
plying with beneficial ownership
requirements, and conducting ro-
bust and timely independent tests
of their AML programs.
● Market Infrastructure – The
Commission must conduct exams
of SEC SIFMU Clearing Agencies
in order to assess, among other
things:
● Financial and operational risks
borne and presented by them to
financial institutions, critical mar-
kets and the financial system;
● Resources and capabilities to
monitor and control such risks;
● The safety and soundness of the
organization;
● Compliance with the Exchange
Act, the rules and regulations
promulgated under the Exchange
Act, and the Dodd-Frank Act.
Commodity Futures
Trading Commission
(CFTC)
● We anticipate 2020 priorities
to remain consistent with 2019
● Preserving Market Integrity –
Focus has been on detecting,
investigating, and prosecuting
misconduct that has the potential
to undermine the integrity of the
markets—including fraud, ma-
nipulation, spoofing, and other
forms of disruptive trading.
● Protecting Customers – Since its
inception, the Commission has
focused on protecting customers
in its markets from fraud and other
abuse.
● Promoting Individual Accounta-
bility – Individual accountability
ensures that the person com-
mitting the illegal act is held res-
ponsible and punished, and when
appropriate, banned from the
market. It deters others, fearful
of facing individual punishment,
from breaking the law in the fu-
ture, incentivizes companies to
develop cultures of compliance
and to report to regulators when
they find bad actors, and pro-
motes the public’s confidence
that justice is being achieved.
● Increasing Coordination with
Criminal Authorities and Other
Regulators – Regulators in the
United States and abroad must
work together to ensure the
entire scope of the misconduct
is identified, investigated, and
prosecuted.
Financial Industry
Regulatory Authority
(FINRA)
● Reg BI – Establishes a “best in-
terest” standard of conduct for
broker-dealers and associated
persons when they make a recom-
mendation to a retail customer of
any securities transaction or in-
vestment strategy involving secu-
rities, including recommendations
of types of accounts.
● Private Placement Retail Com-
munications – FINRA will ana-
lyze how firms review, approve,
supervise and disseminate retail
communications regarding pri-
vate placement securities via
online distribution platforms and
traditional channels.
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10. ● Communications via Digital
Channels – The use of an in-
creasingly broad array of digital
communication channels (e.g.,
texting, messaging, social media
or collaboration applications)
by firms, registered representa-
tives, and customers may pose
challenges to the ability to com-
ply with obligations related to
the review and retention of such
communications.
● Cash Management and Bank
Sweep Programs – While
Bank Sweep Programs may
offer useful features to cus-
tomers—and in some cases, of-
fer higher-than-average interest
rates—they have also raised se-
veral concerns about firms’ com-
pliance with a range of FINRA and
SEC rules.
● Sales of IPO Shares – As the IPO
market has grown and received
additional attention over the past
year, FINRA is focusing its atten-
tion on firms’ obligations under
FINRA Rules 5130 (Restrictions
on the Purchase and Sale of Ini-
tial Equity Public Offerings) and
5131 (New Issue Allocations and
Distributions).
● Trade Authorization – FINRA will
assess whether firms maintain
designed supervisory systems
relating to trading authorization,
discretionary accounts and key
transaction descriptors, such as
solicitation indicators. FINRA will
review if firms have reasonably
designed supervisory systems
to detect and address registered
representatives exercising discre-
tion without written authorization
from the client, as required under
FINRA Rule 3260 (Discretionary
Accounts).
● Market Integrity – In addition
to the areas of focus described
below, FINRA will continue to
review firms’ compliance with the
ongoing obligations discussed in
prior years’ letters, such as mar-
ket manipulation, Trade Reporting
and Compliance Engine (TRACE)
reporting, short sales and short
tenders.
● Direct Market Access Controls
● Best Execution
● Disclosure of Order Routing
information
● Vendor Display Rule
● Financial Management – In addi-
tion to our focus on the new areas
noted below, FINRA will continue
to evaluate firms’ compliance
programs relating to Exchange
Act Rule 15c3-3 (Customer Pro-
tection Rule) and Exchange Act
Rule 15c3-1 (Net Capital Rule), as
well as firms’ overall financial risk
management programs.
● Digital Assets
● Liquidity Management
● Contractual Commitment Ari-
sing from Underwriting Activities
● LIBOR
● Firm Operations – In addition to
the new areas of focus described
below, FINRA will also assess
firms’ supervisory controls rela-
ting to Exchange Act Rule 10b-10
and FINRA Rule 2232 (Customer
Confirmations) and firms’ com-
pliance with FINRA Rule 3310 (An-
ti-Money Laundering Compliance
Program).
● Cybersecurity
● Technology Governance
Municipal Securities
Rulemaking Board (MSRB)
● Governance and Leadership –
Focus on examining all aspects
of governance practices, inclu-
ding the size and composition
of the Board, to identify oppor-
tunities to improve fairness and
transparency.
● Technology and Data – A new
dedicated data management and
analytics department will focus
on data governance, quality and
analytics, including exploring po-
tential opportunities to leverage
cloud technologies to advance
the organization’s data strategy.
National Futures
Association (NFA)
● Cybersecurity (Information Sys-
tems Security Program) Com-
pliance – The self-regulatory
organization has taken an ag-
gressive focus on Cybersecurity
(“ISSP”) compliance.
● Documentation for Compliance
Obligations – NFA continued its
trend of requiring documentation
in writing for virtually all com-
pliance obligations.
● Audits - Commodity Trading
Advisors – NFA appeared to be
more ambitious this calendar
year with commodity trading ad-
visors (“CTAs”), completing more
scoped performance audits.
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12. Strategy Planning
Partner with clients
to develop strategic
roadmaps / plans from a
corporate, operations,
product and regulatory
perspective.
Target Operating Model
Implement, assess,
design, develop and
target operating models
at all levels of the
organization including
processes, people,
systems and product.
Systems Integration
/ Platforms Consolidation
Integrate and consolidate
disparate systems
including vendor
analysis, selection and
implementation of leading
software solutions.
Remediation
Conduct root cause
analysis and provide
remediation assistance
as a result of integrations,
audits, regulatory fines etc.
Program Management
Provide end-to-end
project management,
governance and
execution of the software
development lifecycle
(SDLC).
Process Re-engineering
Analyze and design
workflows and processes
to help organizations
improve customer service
and glean operational
efficiencies and savings.
How
Sia Partners
Can Help You.
Sia Partners offers tailor-made solutions to address the needs of your company
and clients along with regulatory requirements. Depending on your current state,
whether you are identifying a specific obligation, requiring a successful implemen-
tation on the selected solution, or quantifying the post implementation benefits, Sia
Partners will adopt a holistic approach backed by extensive industry knowledge
and experience to address your needs.
Sia Partners delivers turnkey solutions via a mix of Regulatory Reporting expertise
backed with consideration for key transformation enablers like Technology, Ana-
lytics, Operational Excellence and Project Management capabilities. Our compre-
hensive regulatory services include but is not limited to the following:
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13. Eric BLACKMAN
Partner - Banking - New York
eric.blackman@sia-partners.com
00 1 917 769 -6278
Holly ALGER
Managing Director - Banking
New York
holly.alger@sia-partners.com
00 1 402 715 0061
Contact Us.
References.
2020 Examination Priorities. (2020, January).
Retrieved from https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2020.pdf
CFTC Division of Enforcement Issues Annual Report for FY 2019. (2019, November 25).
Retrieved from https://www.cftc.gov/PressRoom/PressReleases/8085-19
Cook, R. (2020, January 9). 2020 Risk Monitoring and Examination Priorities Letter.
Retrieved from https://www.finra.org/rules-guidance/communications-firms/2020-risk-monitoring-and-examination-priorities-letter
Fiscal Year 2020 Bank Supervision Operating Plan Office of the Comptroller of the Currency Committee on Bank Supervision. (n.d.).
Retrieved from https://www.occ.gov/news-issuances/news-releases/2019/2019-111a.pdf
Hood, R. E. (2020, January). 2020 Supervisory Priorities.
Retrieved from https://www.ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/2020-supervisory-priorities
Matsuo, A. S. (2019, December 18). 2020 Federal Supervisory Priorities.
Retrieved from https://advisory.kpmg.us/articles/2019/2020-federal-supervisory-priorities.html
Neill, K. G. (2020, January 6). 2020: What’s on the Horizon for the Debt Collection Industry.
Retrieved from https://www.insidearm.com/news/00045792-2020-whats-horizon-debt-collection-indust/
SEC And CFTC Regulatory Priorities To Watch In 2020. (2020, January 1).
Retrieved from https://www.law360.com/articles/1228214/sec-and-cftc-regulatory-priorities-to-watch-in-2020
Supervisory Insights. (2019, Fall).
Retrieved from https://www.fdic.gov/regulations/examinations/supervisory/insights/sifall19/si-fall-2019.pdf
Szarek, L. (2019, September 23). MSRB to Begin FY 2020 with Focus on Governance.
Retrieved from http://www.msrb.org/News-and-Events/Press-Releases/2019/MSRB-to-Begin-FY-2020-with-Focus-on-Governance.aspx
Who Regulates Whom? An Overview of the U.S. Financial Regulatory Framework. (2017, August 17).
Retrieved from https://www.everycrsreport.com/reports/R44918.html#_Toc490834738
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