The SEC says it has uncovered numerous deficiencies in areas such as marketing and disclosure in a multi-year initiative to raise the quality of advice delivered to investors saving for retirement.
Launched last summer, the Retirement-Targeted Industry Reviews and Examinations (ReTIRE) initiative has initiated more 160 sweep examinations of advisors and brokers to evaluate how they are providing advice to investors saving for retirement, according to commission officials during a live stream of the SEC Speaks conference.
"These are risk-based exams focused on critical areas where there might likely be misconduct, so those could be fee and account selection, sales practices, suitability, supervision and marketing," said Jane Jarcho, associate director of investment adviser and investment company examination at the SEC's Office of Compliance Inspections and Examinations.
Jarcho noted that the ReTIRE program is a collaborative effort between the compliance inspection unit and the broker-dealer side of the organization. The lion's share of the exams to date — around 115—have focused on RIAs, according to Jarcho.
While the ReTIRE initiative is taking a hard look at some of the specific concerns about advice in the retirement space, advisors should be prepared for examiners to address these issues every time the commission visits a firm, according to Kevin Goodman, the compliance unit's associate director of broker-dealer examinations.
"That focus on protecting retail investors and those saving for retirement really permeates all of our exams," Goodman said.
Jarcho rattled off a number of instances where examiners have found suspect activities at advisor and brokerage shops. It's a stark reminder that firms should reevaluate how they advertise their practice and deliver advice to clients saving for retirement.
"Some of the observations that we've had to date have included misleading marketing materials with respect to rollover activities and other retirement-based communications, lack of documentation evidencing the reasonableness of recommendations, vague or omitted disclosures associated with fees and services and we've seen a number of issues with mutual fund share-class selection," she said.
In the retirement arena as well as with other initiatives, the compliance office's director Marc Wyatt argued that his division is aiming for transparency. He said it has adopted the practice of publishing its exam priorities at the outset of the year and supplements that guidance with "countless risk alerts" as new areas of concern emerge.
"We are not trying to be a gotcha regulator," Wyatt said. "This is the third year in a row we've published our priorities, so we've told you what we're going to be focused on in upcoming years."
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