SEC exams will be focusing on RIAs serving a significant number of seniors after finding "significant weaknesses" in advisors' policies for protecting elderly clients, an agency official said.

“Over the last six to nine months, we’ve examined roughly 200 advisors and over a third had policies and procedures in place for working with senior accounts, but half were not written policies and half hadn’t implemented them,” Charles Koretke, assistant director of the SEC’s Office of Compliance Inspections and Examinations, said late last week.

Koretke, speaking at the IAWatch compliance event in Washington, D.C., said “staff did find some significant weaknesses” in senior policies during the exams.

With the number of seniors expected to double in the next three decades, the SEC said it is scrutinizing firms that have higher numbers of senior investors and senior assets.

“Our focus is on examining advisors with considerable senior investor bases,” Koretke said. “For our purposes, we’re defining senior clients as those age 62 or over, because that is when investors become eligible for Social Security benefits.

These, according to Koretke, are among the questions the SEC will be asking advisors: How do you address diminished capacity and changes in power of attorney and trustees? What happens when your client transitions to retirement? How are you dealing with communications to senior clients? What happens upon the death of a client?

The SEC found that with some RIAs that had policies for protecting senior citizens, “staff said advisors didn’t address how to handle situations” of diminished capacity or possible fraud.

For instance, firms had policies that required advisors to get a notarized signature from spouses when account changes are made, but didn’t specify how red flags would be monitored or supervised, Koretke said

Many firms also failed to create policies that were tailored to their business models with regard to products, product rollovers and fees, he added.

“One thing I think you should know is we’ll continue to look at high-risk products, variable annuities, target-date funds, their fee disclosures and how fees are being charged. We see this as being integral in protecting investors and seniors in particular,” Koretke said.

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