The SEC is starting a multi-year examination initiative on how broker-dealers and advisors ensure their clients are prepared for retirement.
the Securities and Exchange Commission examinations will evaluate issues such as whether registrants, advisers and broker-dealers are selecting the appropriate account for their client and whether they are performing due diligence on investment options.
Other questions examiners will determine is what type of initial investment recommendations are being made for clients nearing retirement age and whether they are providing ongoing account management, the SEC’s Office of Compliance Inspections and Examinations (OCIE) said in a Risk Alert.
The OCIE is calling the program its Retirement-Targeted Industry Reviews and Examinations (ReTIRE) Initiative.
The disclosure was expected. Earlier this year, OCIE announced that its 2015 Examination Priorities includes a focus on “examining matters of importance to retail investors and investors saving for retirement.”
Among other data, the examiners will review registrants’ sales and account selection practices in light of the fees charged, the services provided to investors, and the expenses of such services, the OCIE said.
Potential conflicts of interest will be studied, the agency said. They will also examine whether there is a “reasonable basis” for investment recommendations made by the registrant, the OCIE said.
The OCIE said the National Examination Program Alert is being issued to inform registrants that the SEC is looking into the issue of retirement-based savings “in recognition of the complex and evolving set of factors that retail investors face when making such investment decisions.”
The alert said that some of these factors include the broad and changing array of investments available and services offered and the “changing market environment,” i.e., likely including the historic low interest rates that are making it difficult for investors to appropriately include fixed-income investments in their portfolio if they expect a reasonable return.
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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