“But I, too, have concerns that we might wind up in a much worse place,” Borzi said about the SEC’s plans to move forward with a uniform best practices rule.
In the meantime, the SEC is leveraging existing resources and technology to increase IA exams, whose impact has rose from 10 percent to 15 percent of the industry over the past year, Fleming said.
Currently, advisors see an SEC examiner in their office about once in every 10 years. The agency has been soundly criticized for the low rate even by former SEC staff, who have called the lack of IA exams a disaster waiting to happen.
On the exam front, the agency has reassigned 100 examiners to advisor firms from broker-dealers, Fleming said, adding that the SEC is getting better at taking advantage of technology. “It takes more of the burden off examiners so they can get out and see more people,” he added.
The SEC Investor Advocate echoed Clayton’s sentiments, however, about not using third-party firms to bolster SEC resources. “I have never been a fan of going down the road of third-party advisor exams,” Fleming said. “The low level of exams from RIAs is dangerous and I get that. But I still worry about going down that road and shifting to private firms.”
To become more efficient at leveraging their exam resources, SEC examiners are looking at advisor’s ADV filings each year, using technology to zero in on those they think are higher-risk, Fleming added.