SEC Names Retirement Investments Among 2017 Exam Priorities

The Securities and Exchange Commission (SEC) this week announced its Office of Compliance Inspections and Examinations’ (OCIE) 2017 priorities.

It’s worth noting in advance that 2017 will mark the start of a transition for the SEC—away from eight years of oversight/appointments by a Democratic president in favor of Republican control of the executive branch, not to mention Congress.  

Advisers will likely know the SEC has five commissioners who are appointed by the president of the United States with the advice and consent of the Senate. Their terms last five years and are staggered so that one commissioner’s term ends on June 5 of each year. While rules are in place to ensure that the commission remains non-partisan (generally no more than three commissioners may belong to the same political party, for example), the president gets to designate one of the commissioners as chairman, the SEC’s top executive holding significant sway over commission examination and enforcement activity.

Media outlets have reported president-elect Donald Trump’s choice for the top SEC post will be Jay Clayton, attorney and partner at Sullivan & Cromwell LLP, frequently described in the press as one who is skeptical about the role of financial regulators in promoting market efficiency and stability.

As it stands today, the SEC’s areas of focus for 2017 include electronic investment advice, money market funds, and financial exploitation of senior investors. “The priorities also reflect a continuing focus on protecting retail investors, including individuals investing for their retirement, and assessing market-wide risks,” SEC suggests.

“These priorities make clear we are continuing to focus on a wide range of issues impacting our markets, from traditional areas such as market-wide risks to new forms of technology including automated investment advice,” says outgoing SEC Chair Mary Jo White. “Whether it is protecting our most vulnerable senior investors or those investing in the trillion dollar money market fund industry, OCIE continues its efficient and effective risk-based approach to ensure compliance with our nation’s securities laws.”

NEXT: Honing in on SEC enforcement priorities 

OCIE plans to continue its focus on “public pension advisers” and to expand its focus on senior investors and individuals investing for retirement.

“OCIE is broadening its ReTIRE initiative to include reviews of investment advisers and broker/dealers that offer variable insurance products to investors with retirement accounts as well as those advisers that offer and manage target-date funds,” SEC warns. “OCIE also will focus more specifically on registrants’ interactions with senior investors, including with respect to identifying financial exploitation.”

Robo-advisers will also receive an increasing amount of scrutiny during 2017: “OCIO will undertake examinations to review firms delivering investment advice through electronic mechanisms, sometimes referred to as robo-advising, as well as wrap fee programs in which investors are charged a single bundled fee for advisory and brokerage services.”

Also of interest to the retirement specialist market is the ongoing analysis of cybersecurity issues, including testing of advisers’ and providers’ implementation of best-practices to protect client data and ensure control/security of digital assets. Further, “consistent with OCIE’s goal of enhancing oversight of FINRA to protect investors and the integrity of our markets, it will continue conducting inspections of FINRA's operations and regulatory programs, and focus resources on assessing the examinations of individual broker/dealers.”

The published priorities for 2017 are not exhaustive and may be adjusted in light of market conditions, industry developments, and ongoing risk assessment activities, SEC concludes.

More information is available at www.sec.gov.