The SEC enforcement unit overseeing financial advisors will be focusing on conflict of interests this year, its head said Thursday.
Cases are likely to include matters involving best execution failures in the share class context, undisclosed outside business activities, related-party transactions, fee and expense misallocation issues in the private fund context and undisclosed bias toward proprietary products and investments, Enforcement Asset Management Unit Co-Chief Julie Riewe said in a prepared speech.
She claimed conflicts are rife in the advisory industry.
Providing advice that puts making money for customers above making money for the advisor is the heart of advisors’ fiduciary relationship with clients, Riewe said.
“Only through complete and timely disclosure can advisors, as fiduciaries, discharge their obligation to put their clients’ and investors’ interests ahead of their own,” she said.
She pointed to a number questions advisory firms need to answer to thwart conflicts including:
• Has a firm identified conflicts and can they be removed?
• If the adviser cannot or chooses not to eliminate the conflict, has the firm mitigated the conflict and disclosed it?