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January 13, 2015 at 01:14 PM
The Securities and Exchange Commission said Tuesday that this year’s exam priorities include protecting those saving for retirement, focusing on registered entities’ branch offices and expanding the agency’s review of never-examined firms to encompass registered investment companies.
The agency’s exam priorities list, released Tuesday, says its “various examination initiatives” affect investment advisors, broker-dealers and transfer agents and are broken down into three areas: protecting retail investors and those saving for retirement; addressing marketwide risks like cybersecurity; and using data analytics to identify illegal activity.
The exam priorities list, which the agency has shared publicly since 2013, is shorter than in past years and strays from its typical list format.
While focusing on threats posed to retail investors and their retirement planning is “nothing new” for the agency, the fact that SEC exam chief Andrew Bowden is “leading with it” means the agency “will dive into it a bit more,” says Sanjay Lamba, assistant general counsel at the Investment Adviser Association.
Frontline Compliance Services notes that because retail retirement accounts will be “priority No. 1” for the agency, SEC exams of advisors and brokers likely will “focus heavily on retirement assets, especially rollovers of plan assets.”
The SEC also says that it will focus on fees charged by dually registered advisors, including wrap fees. “Where an advisor offers a variety of fee arrangements, we will focus on recommendations of account types and whether they are in the best interest of the client at the inception of the arrangement and thereafter, including fees charged, services provided, and disclosures made about such relationships,” the SEC explained.
A new focus this year, according to Bowden, will be on registered entities’ supervision of registered reps and financial advisor reps in branch offices. Its exams will use data analytics to identify branches that may be “deviating from compliance practices of the firm’s home office.”
Bowden said on a Tuesday afternoon call with reporters that these branch office reviews will focus on “registrants’ supervision of reps located outside the home office.” The agency will use “data analytics to identify issues in this regard.”
In addition, the agency will continue to examine fixed-income investment companies, “assessing the preparedness of fixed-income funds to address risk associated with the expected raise, at some point, in interest rates,” Bowden said.
