SEC Announces Priorities for 2016; Protecting the Retail Investor From Retirement Advisors

The Securities and Exchange Commission (SEC) announced their priorities for 2016 and examining retirement plan advisors remains a focal point. In June of 2015, the SEC, through their Office of Compliance Inspections and Examinations (OCIE), launched the Retirement-Targeted Industry Reviews and Examinations initiative (ReTIRE). Since that time, OCIE has conducted over 160 examinations of retirement advisors and brokers, with over 115 on the advisors. The purpose, generally, is to protect retail investors and their retirement accounts.

With a priority on protecting retail investors, OCIE is examining SEC registered advisors to ensure they are taking adequate steps to follow their fiduciary obligation towards their client’s best interests. This often means the advisor’s fee is scrutinized, with practices such as reverse churning being the target. Reverse churning, in sum, is a practice of advisors putting investors into accounts that pay a fixed fee to the advisor, but usually fail to perform in a manner to justify that fee. For 2016, the review is expanding and will now include the practice, disclosures, and sales strategies for exchange traded funds (ETF). Two other new priorities include examining the sale of variable annuities and undisclosed public pension advisor gifts and entertainment.

The effort by OCIE is not to be confused with the Department of Labor (DOL) examination on retirement advisors, which is running concurrently. The DOL examinations under the Employee Retirement Income Security Act, however, is similarly focused on protecting the retail investor. Comments by those at the SEC and DOL suggest that the focus on protecting the retail investor through these investigations are likely to continue for some time.

© 2016 Vandenack Williams LLC
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