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Monday, August 3, 2015

SEC to Enhance Examination and Compliance Standards in High-Risk Retail Investment Sector

What are the latest developments within the retail retirement investment industry as pertaining to brokerages and financial advisors? 


On June 22, 2015, the Office of Compliance Inspections and Examinations (OCIE) of U.S. Securities and Exchange Commission (SEC) announced its intentions to review certain areas of the retail investment industry deemed to be at a ‘higher risk’ for investment scams and financial harm. Most notably, the OCIE intends to focus on four core categories: 
• Whether retail advisors have a reasonable basis for their recommendations
• Conflicts of interest
• Supervision and compliance controls
• Marketing and disclosure
According to the statement, the OCIE will use a combination of data analytics and registrants’ self-reported due diligence reports to randomly select registrants for the initiative – known as the ReTIRE Initiative

If selected, the evaluation will begin with a review of client files to ensure consistency with federal securities laws when making recommendations for certain investments, including whether the registrant has provided the client with ongoing account management. From there, the selected registrant must demonstrate a dedication to avoiding and/or disclosing conflicts of interest, including whether the registrant maintains certain financial incentives for recommending retail investment products. 

In addition, evaluations will review whether retail investment brokerages or advisors are promoting proper supervision and compliance controls, particularly with regard to firms with multiple branch offices. 

Lastly, marketing and disclosure tactics will be carefully reviewed by the OCIE to ensure customers are not being deceived or misled by unscrupulous advertising techniques. More specifically, the agency will look at the following factors when reviewing marketing materials: 
• The content of all marketing materials is true and accurate, and does not omit material information; 
• All content regarding fees is true, accurate, and not misleading; and
• Marketing materials are forthcoming about credentials.
If you would like additional guidance and counsel as to the upcoming SEC examinations and evaluations, please do not hesitate to contact corporate and securities law firm Lehman Eilen today: (516) 222-0888.  We serve clients in New York City and the surrounding areas.





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