According to Office of Compliance Inspections and Examinations (“OCIE”)
The U.S. Securities and Exchange Commission (“SEC”) regulates more than 4,000 broker-dealers and more than 12,000 registered investment advisers (“RIAs”) with nearly 67 trillion dollars of assets under management. These are the priorities the SEC recently expressed.
- Elderly and Retiring Investors –
The SEC will assess how firms interact with seniors, including their ability to detect the financial exploitation of seniors. Exams will focus on supervisory programs and rules related to services and products directed at senior investors.
- Electronically Distributed Investment Advice a/k/a Robo Advisers –
For advisers that provide electronic advice, the SEC will review disclosure of conflicts, marketing, compliance programs, data protection and the manner of how investment recommendations/algorithms are formulated.
Generally, cybersecurity refers to unauthorized internal and external access to client accounts, trading systems, wrongful asset transfers and data loss. The SEC will continue its initiative to examine controls, compliance procedures, including testing of cybersecurity plans.
- Bad Apple Brokers and Their Employers –
The SEC says that they will use data analytics to examine individuals with a history of misconduct and examine the firms that now employ them. For instance, if someone was banned from acting as a registered representative and now seeks to be become registered as an investment adviser representative (“IAR”) that could trigger an examination of the new RIA.
- Never Been Examined Advisers –
This program begun in 2014 will continue, but it will be updated to add a component focusing on a risk based review. The need for this program exists because the SEC only examines approximately ten percent (10%) or so of the RIAs it regulates every year.