SEC Revs up Examinations of Firms That Have Not Been Reviewed

Never been examined by the SEC? Get ready. The agency has revved up examinations of firms that have never been reviewed and that are at least three years old, InvestmentNews reports. While one advisor said the exams were thorough, consultants say that they are streamlined — starting with a broad-based call and with most lasting less than a day. Many are reportedly focused on custody issues. 

With the SEC unlikely to get funding to hire new examiners so they can review more advisors — the SEC’s current annual exam rate is 9% of the 11,000 registered RIAs — plenty of solutions are being discussed, including: 
• charging all firms a fee to pay for their examinations;
• forming an SRO or partnering with FINRA; and
• using third-party examiners like fi360.

One commenter on the InvestmentNews article suggests that the SEC should focus on dually registered or hybrid advisors. Is there an inherent conflict with advisors who switch back and forth from fee to commissioned and fiduciary to suitability models?