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March 05, 2021 at 09:34 AM
What You Need to Know
- The number of RIAs the SEC oversees increased from about 12,000 to more than 13,900.
- The regulator will examine some RIAs that didn't file a Form CRS.
- The SEC is “working on” an ESG risk alert.
“It’s going to be a tough year” for the Securities and Exchange Commission’s exam team without additional resources, Pete Driscoll, director of the Divisions of Examinations, said Thursday.
Speaking at the Investment Adviser Association’s virtual compliance conference, Driscoll said that the growth of the advisory industry “continues to escalate, and certainly the complexity does too.”
The exam division is “hoping for 15% exam coverage of advisors,” as examiners were able to achieve in 2020, “but it’s going to be tough without additional resources,” Driscoll said.
Driscoll noted the “nutty year” so far with COVID, market volatility and meme stocks. “There’s just a lot of areas where we have to pivot from a cause perspective.”
The SEC noted Wednesday in releasing its 2021 exam priorities that examiners completed 2,952 exams in fiscal 2020, a 4.4% decrease from fiscal 2019.
In the last five years, the number of RIAs the SEC oversees increased from about 12,000 to more than 13,900, and the assets under management of RIAs increased from approximately $67 trillion to $97 trillion, the agency reported.
A longstanding complaint by SEC chairs and officials is that the agency lacks the resources to do its job.
That worry was reiterated in the just-released 2021 exam priorities list — particularly as it relates to advisor exams.
Coverage of RIAs increased from 10% in 2014 to a high of 17% in 2018. The Division’s coverage of RIAs in 2020, “a year in which the RIA population continued to increase and the pandemic necessitated a mid-year shift to remote examining,” was 15%.
The exam division “has been fortunate enough that technology was there and our ability to switch like that was pretty seamless,” Driscoll said.
However, as noted in the exam priorities, “there remains a significant risk that, in light of industry growth and increased complexity and other factors, it does not have sufficient resources to adequately cover the RIA space.”
