Third-Party Audits

According to Luparello at the SEC, the agency will monitor a variety of investment products including non-traded REITS and exchange-traded products—the latter came under scrutiny for the role they played during the market tumult in late August.

One of FSI’s big issues is the disparity between the frequency of examinations of broker-dealers by FINRA (more frequent) versus those of registered investment advisors by the states and the SEC (much less frequently). Brown asked Luparello about the SEC’s thoughts regarding approving audits by third-party entities to level the playing field.

“I think there’s great recognition at the Chair level of the disparity of the investment protection concerns that come with the lower level of investment advisor examination coverage, and I think she has expressed an openness to explore a variety of alternatives to go about that,” Luparello said.

“One such notion is the idea of third-party audits. But who does those audits and how you oversee them can’t be answered at this point,” he added.
 

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