If you haven’t gotten a letter from the Securities and Exchange Commission about teacher retirement plans, consider it a window of opportunity to clean up any errant compensation and supervision practices, attorneys from the law firm of Drinker Biddle said during a conference with 1,100 securities industry and compliance executives yesterday.

Since last June when the SEC launched its “sweep” examination to inquire into the sales practices applicable to retirement plans for teachers, broker-dealers and third-party administrators have been getting letters from SEC examiners asking for details about their compensation, their supervision practices and potential conflicts of interest, the lawyers said during a Drinker, Biddle “Insider the Beltway” audiocast.

The letters help the SEC determine whether violations have occurred in the burgeoning 403(b) market, which held $1.1 trillion in assets as of fourth quarter 2019 and has been a magnet for aggressive sales tactics.

“Hopefully you do not get a letter and if you did not, you’re in an advantageous position to do a review of what policies and procedures you have in place, which should reveal if there are weaknesses and allow you to ferret out reps who are pushing the envelope,” Drinker Biddle partner James Lundy said. Lundy is a member of the firm’s SEC and regulatory enforcement team.

“The moral of this story is the time is now for firms to look at their fees and supervisory procedures and make sure they’re following regulation,” added Drinker Biddle partner Fred Reish, who said the sweep is focused on both broker-dealers and dually registered investment advisors.

Reish said the SEC is using letters to ask firms for:

• Compensation paid to reps since Jan. 1, 2017, especially for referring investors to specific investment options or companies; along with related documents.

• Information and documents concerning how investors receive investment counseling.

• Details regarding supervisory practices and documentation on sales abuses the firm has uncovered and addressed.

• Details and documents regarding any potential conflicts of interest the firm has uncovered and addressed.

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