This year the Securities and Exchange Commission will be looking more closely at exchange traded funds and variable annuities, new areas of focus for the agency from last year.
The regulator's Office of Compliance Inspections and Examinations released its examination priorities for 2016, citing several new areas of focus including specific product areas, how products are promoted, liquidity controls, and public pension advisors. The regulator also reiterated its focus on previously areas such as cybersecurity, fee selection, reverse churning and services advisors provide to retirement accounts.
“These new areas of focus are extremely important to investors and financial institutions across the spectrum,” SEC Chair Mary Jo White said in a statement. “Through information sharing and conducting comprehensive examinations, OCIE continues to promote compliance with the federal securities laws to better protect investors and our markets.”
Last year, the SEC concentrated its examination efforts on companies offering fixed income products and alternative investments, including an emphasis on equity fees and expenses charged by advisors to private equity funds.
But this year, the regulator plans to review basic elements, such as the creation and redemption process, as well as ETFs’ sales strategies, trading practices and disclosures.
The SEC also noted it would carefully study variable annuities, saying these products have become a key part of average Americans’ retirement plans. “We will assess the suitability of sales of variable annuities to investors (.g., exchange recommendations and product classes), as well as the adequacy of disclosure and the supervision of such sales,” the letter said.
The regulator noted it also planned to use data analysis to examine product promotion across the board to identify cases in which there are potential suitability issues or breaches of fiduciary obligations related to the issuance of new, complex, and high-risk products.
