SEC Examiners to Target Complex Products, Annuities, Non-Traded REITs in Reg BI Investigations

Posted on February 27th, 2023 at 3:26 PM
SEC Examiners to Target Complex Products, Annuities, Non-Traded REITs in Reg BI Investigations

The Securities and Exchange Commission’s (SEC’s) Examinations Division will target advisors’ recommendations of complex derivatives and leveraged ETFs, as well as annuities and nontraded REITs in Regulation Best Interest (Reg BI) investigations in 2023. 

The SEC has published its annual Exam Priorities this week, which additionally noted that examiners will closely monitor the recommendations that advisors provide to clients on proprietary products and microcap securities. Examiners evaluating Reg BI compliance will review investment advice, disclosures provided to clients, and the processes firms employ to ensure that advisors make best-interest recommendations, according to the SEC. “Examinations may also focus on recommendations or advice to certain types of investors, such as senior investors and those saving for retirement, and specific account recommendations, such as retirement account rollovers and 529 plans”, according to the SEC’s report. 

Examiners also are expected to closely monitor firms that recommend cryptocurrency products, particularly amidst “recent financial distress among crypto asset market participants”, according to the SEC. The examiners additionally will scrutinize firms’ procedures for responding to cyberattacks as well as the practices used to protect confidential customer information. 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

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