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January 31, 2014 at 07:50 AM
Two top broker dealer regulators explained Tuesday why qualified plan rollovers and sales to seniors will face heightened scrutiny this year.
“The goal is to see whether there is an abuse of rollovers,” Kevin Goodman, national associate director of the BD exam program for the Securites and Exchange Commission’s Office of Compliance Inspections and Examinations, told attendees at the FSI OneVoice conference.
“If you look at the numbers there are burgeoning assets” in rollovers, and there’s potential for advisors and brokers to unnecessarily steer clients into one for their own financial gain, Goodman said. “There’s also the DOL analysis of how the fiduciary standard may apply in this context. We’ll be looking at this during a lot of exams,” particularly where the agency notices “someone that is highly successful at rollovers; we’ll take special interest and dig in and see what conversations clients are having” with these advisors and brokers.
Both the SEC and the Financial Industry Regulatory Authority included rollovers and sales to seniors in their top exam priority list this year.
Cogent just reported that one in 10 (9 percent) of investors with at least $100,000 in investable assets are likely to roll over a total estimated $280 billion into IRAs this year.
Regular exams conducted by FINRA this year will also include rollovers, said Susan Axelrod, executive vice president of regulatory operations at FINRA. “We didn’t do a sweep on [rollovers], but the latter part of 2013 we started [including rollovers] in the regular cycle of exams and we will continue to do that this year,” she said.
As for sales to seniors, Goodman said that after the SEC completed its sweep exam of sales to seniors last year “we didn’t find rampant abuse, only isolated” cases. However, he said that the SEC will place a “special emphasis on sales to seniors” during exams, looking at how firms train reps and advisors on senior issues, their sales policies, and which products are being sold to seniors.
