The SEC recently announced an enforcement initiative that will target retail investor harm. The agency’s task force will use data analytics to find widespread problems regarding fee disclosures and unsuitable investment recommendations. In addition to data analytics, the SEC will rely upon tips, complaints and referrals that come into the SEC.
This heightened analysis of the retail investor market should be a wake-up call to firms who service the retail investor space. There are a few questions that you should be asking as you move forward:
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Do I have a rigid supervisory system to make sure clients are receiving suitable investment advice for the fee being paid?
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If my firm does not have a robust supervisory system over retail investment advice, what is the firm doing to develop and deploy such a system?
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What does you supervisory system provide if it finds unsuitable investment recommendations?
There are certainly additional questions that firms can ask themselves, but the point is made. What are you doing to make sure the SEC does not have an issue with the retail investment advice that you are giving to your clients? If you cannot answer that question, you had better go back to the drawing board.
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