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SEC to Increase Scrutiny of RIAs That Have a High Number of Elderly Clients

March 13, 2019

The SEC plans to target its examinations toward firms with a high number of senior clients, according to news reports.

Of the roughly 200 RIAs the regulator examined over the past six to nine months, more than a third did have policies and procedures specifically governing senior accounts -- those belonging to clients age 62 and over -- Charles Koretke, assistant director of the SEC’s Office of Compliance Inspections and Examinations, said last week at the IAWatch compliance conference in Washington, D.C., according to FA magazine.

However, half of the examined firms didn’t have written policies, and half hadn’t put them in practice, he said, according to the publication. Meanwhile, the number of seniors is expected to double over the next 30 years, according to the SEC, FA magazine writes.

“Our focus is on examining advisors with considerable senior investor bases,” Koretke said, according to the publication.

FA magazine doesn’t specify what constitutes a high proportion of senior accounts. But Wendy Vasquez, chief compliance officer of Nashville, Tenn.-based Cypress Capital, said at the event that the SEC notified her firm that it “didn’t have adequate procedures in place to protect vulnerable senior clients,” according to the publication.

Seniors’ assets comprise around 13% of Cypress’s total assets, according to Vasquez, FA magazine writes.

The SEC examined a record 17% of all advisors last year, and although the record-length government shutdown is likely to drive down those numbers, the regulator is harnessing technology to target RIA policies and practices aimed at senior investors, according to the publication.

To stay on the SEC’s good side, RIA firms should establish written policies and practices in regard to several aspects of their businesses involving senior assets, according to Vasquez, FA magazine writes.

These include clients nearing retirement or already retired and clients who use third parties acting under power of attorney or as trustees, she said, according to the publication.

In addition, RIAs should have policies in regard to the death of clients, according to Vasquez, FA magazine writes. Furthermore, RIAs must train their advisors and staff on senior protection, the SEC said, according to the publication. And that training should be documented, said Valerie Mirko, general counsel of the North American Securities Administrators Association, according to FA magazine.

By Alex Padalka
  • To read the FA Magazine article cited in this story, click here.