Plan Sponsors and Registered Investment Advisors take note as the Securities and Exchange Commission has released their examination priorities for calendar year 2017. There are topics which have repeatedly been in the cross-hairs of the Examination Division in prior years; however, there are new items on the Commissions’ list which should be of high-interest to Plan Sponsors across the land. The topics identified as areas of interest by the SEC include Electronic Investment Advice, Target Date Funds and Conflicts-of-Interest – including Pay-to-Play schemes – and fulfilling fiduciary duty. Registered Investment Advisors have been put on notice that the aforementioned topics will be a target of the Examination Division of the SEC during this calendar year.
Plan Sponsors Beware
If specific topics are important to the SEC, those same topics should be important to Plan Sponsors, Investment Committees and Benefits Committees.
Electronic Investment advice is a very broad topic. During 2017 investors have more investment advice options than ever before. Investment advice comes in the forms of human interaction, digital delivery and robo advisors. (Robo advisors are specifically identified as a target of examination in the Examination Priorities for 2017). The formulation of investment recommendations and the compliance practices for overseeing algorithms that generate investment recommendations are specific targets for the SEC’s 2017 Investment Advisor Examinations. Since it is common-knowledge that many Plan Sponsor Investment Committees utilize advisors and systems that employ such technology the topic is worthy of being an “agenda item” and a topic of some discussion at the next Investment Committee Meeting.
SEC 2017 Examinations are Casting a Wide Net
Does your retirement plan utilize Target Date Funds, Money Market Funds or Advisors who are members of the Financial Industry Regulatory Authority (FINRA)? The Commission has also identified each of those areas as targets of their 2017 Examinations.
Plan Sponsors are well-advised to discuss these Examination topics with their Investment Advisor well before the results of any examination may surface and tarnish the record of an uninformed Investment Committee.
