The following brief updates exemplify trends and areas of current focus of relevant regulatory authorities:
SEC Chair Includes Decision on Uniform Fiduciary Standard in List of Critical Initiatives
SEC Chair Mary Jo White indicated in her remarks at the SEC Speaks conference on February 21, 2014 that she is urging the SEC to decide whether to implement a uniform fiduciary standard for investment advice. The Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the SEC to impose a fiduciary duty standard of care for brokers providing retail investment advice. Currently, brokers are subject to a suitability standard when selling investment products. If enacted, such a measure would hold brokers to the same standard that presently governs investment advisers.
OCIE Launches Never-Before Examined Adviser Initiative
The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced on February 20, 2014 that it plans to engage a significant percentage of advisers that have not been examined since registering with the SEC. The focus is on those advisers that have been registered with the SEC for three or more years. The letter sent by OCIE to advisers informing them of the initiative indicates that advisers to private funds, which are being examined pursuant to the “Presence Exam” initiative launched in October 2012, are excluded from the new exam initiative. The exams to be conducted under this initiative include two distinct approaches:
- The risk-assessment approach is designed to allow OCIE to gain a better understanding of an adviser’s overall business activities with a particular focus on the adviser’s compliance program and representations made in disclosure documents.
- The focused review approach involves comprehensive risk-based examinations of one or more targeted areas that OCIE deems to be high-risk, such as the adviser’s compliance program, filings and disclosures, marketing materials, portfolio management conflicts of interest, or the safety of client assets.
For more information about the initiative, please see here.