FA: It’s becoming common for investment advisors to have an off-site mini-examination focused on risk. Are you doing this for broker-dealers or is this being considered?
Goodman: I expect with the new dealer registrants in the municipal advisor, crowd-funding portal and security-based swaps areas, we will be using these types of exams extensively.
FA: What new or heightened broker-dealer examination and enforcement issues are emerging with baby boomers going into retirement?
Goodman: We expect the aging population will see fraudsters trying to seize on their increasing demand for complex financial products that have innovative approaches to the generation of investment returns and minimization of risk. Some baby boomers will be susceptible to these pitches because they will need higher returns as they approach retirement.
FA: What changes have you made in the broker-dealer exams since you took over in May?
Goodman: The changes actually started three years ago with an extensive self-assessment process. The first year was focused on evaluation while the next two have been concentrated on implementation. One of the changes that has worked particularly well has been more frequent exchanges with corporate executives and board members. We now routinely reach out to these individuals to get better information on their view of risks at their firms as well as to share with them concerns we have identified during examinations. Another advance we have made is the creation of an electronic work book. Our examiners used to write long detailed reports. The workbooks have standardized and promoted more consistency across exams. Firms should see this increase in efficiency by getting reports on the results of field exams quicker than they used to.