On Tuesday, the
"Retail investors of all ages face a complex and evolving set of options when determining how to invest their money, including retirement funds," OCIE writes.
One concern, it says, is that brokers and advisors have been chasing yield through complex or risky vehicles such as private funds and structured products. The mounting complexity of the products, services and information available to comes as "investors are more dependent than ever on their own investments for retirement," OCIE says, citing the long-running shift away from employer-sponsored defined-benefit plans toward defined-contribution plans.
KEY DOCUMENT FOR ADVISORS
The annual exam priorities, issued early in each of the last three years, highlight for industry the areas of greatest concern within the commission. That makes the document a warning that advisors ignore at their own peril, compliance experts say.
"This may be the most important regulatory document published all year," Cipperman Compliance Services said in a note circulated Tuesday. "Firms should prepare their compliance programs to address the issues identified or risk enforcement proceedings."
OCIE says it will take a hard look the sales practices of advisors who help clients transition their retirement assets from an employer-sponsored plan into an individual account or other investments — particularly when that move entails greater risk or higher fees.
FEE ISSUES IN SPOTLIGHT
Fee selection and account placement once again figure prominently in the
In particular, the commission reiterated its concern about "reverse churning": the practice of putting a seldom-traded account in the RIA side of the practice, where it could be subject to an annual fee based on AUM or any number of other fee structures.
"Where an adviser 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," OCIE says.
"To the extent that I had retail clients," says
Other areas of concern outlined in OCIE's guidance continue existing initiatives, including firms' cybersecurity practices. Last year, the commission conducted a sweep to evaluate cybersecurity at broker-dealer and advisor firms — a program the agency says it will now extend to transfer agents.
OCIE also says that it will continue to build on its efforts to mine
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