The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations says it will be increasing its oversight of combined investment advisor and broker-dealer firms, as well as closely monitoring newly registered hedge fund and private fund advisors.

The growth in dually registered firms is gaining increased attention by the OCIE, which worries about conflicts of interest. The OCIE is responsible for examining 11,000 registered investment advisors and 800 registered investment company operations that manage $50 trillion for investors.

In a directive that lays out its national examination program for the year, the office says dually registered advisor exams will review how professionals and firms meet suitability obligations when determining whether to recommend brokerage or advisory accounts, the financial incentives for making such recommendations and whether all conflicts of interest are fully and accurately disclosed.

Additionally, the examiners will see if the businesses have guidelines for when a financial professional makes a securities recommendation to a customer with a broker-dealer account as opposed to an investment advisor account.

For the coming year, the OCIE aims to establish a presence and credibility with the 1,500 hedge fund and private fund advisors the unit now oversees as a result of the Dodd-Frank Act. The office has completed exams of 30 of the funds, and 70 reviews are being processed. The unit’s goal is to examine 25% of hedge funds and private funds in the first year and a half.

Along those lines, the office says it will focus on the growing use of alternative and hedge fund investment strategies in open-end funds, exchange-traded funds and variable annuity products. In particular, it will determine whether a find’s leverage, liquidity and valuation policies pass regulatory muster; whether funds have the personnel and infrastructure to oversee these strategies; and whether these funds are being properly marketed.

The unit will also focus this year on payments made by advisors and funds to distributors and intermediaries to see if the boards are getting adequate disclosure and giving proper oversight.

“The staff will assess whether such payments are made in compliance with regulations, including Investment Company Act Rule 12b-1, or whether they are instead payments for distribution and preferential treatment,” the OCIE’s 2013 priorities announcement said.

The unit says it will also be paying more attention to whether mutual funds are conducting mandatory stress testing and keying in on the factors used in the tests and the results.

Another item on the OCIE’s watch list is the rules barring advisor and fund contributions to government officials with the aim of getting more business (“pay to play”), as well as firms’ adherence to exemptive orders on closed-end funds, managed distribution plans, employee securities companies and exchange-traded funds.

The examination priorities and focus areas were chosen by senior exam staff and management in Washington, D.C., and in the SEC’s 11 regional offices, along with officials of other SEC divisions and offices. They were based on a number of different sources, including information found on required SEC filings, information gathered through examinations, communications with other U.S. and international regulators, and comments and tips from investors and SEC registrants.

To see the full listing of OCIE exam priorities for the year, go to:

––Ted Knutson