SEC Warns Brokers-Dealers, RIAs, about Misconduct

SEC Warns Brokers-Dealers, RIAs, about Misconduct during Pandemic Shutdown

The SEC issues Risk Alert concerning Possible Misconduct due to COVID-19 Market Volatility 

According to a new Risk Alert published by the U.S. Securities and Exchange Commission (SEC), the regulator warns that registered investment advisers (RIAs) and broker-dealers cannot simply assume their normal compliance systems will be adequate during this volatile time.

SEC examiners reportedly covered six categories: protection of investors’ assets; supervision of personnel; practices relating to fees, expenses, and financial transactions; investment fraud; business continuity; and the protection of investor and other sensitive information. 

The alert highlights potential risks from employees working in a fully remote environment, as well as increased risk in market volatility as well as financial conflicts of interest.

Remote Work Environments

According to the alert, there are also risks to investors due to the remote work environments. Many firms require their personnel to use videoconferencing and other electronic means to communicate while working remotely.

These practices may create vulnerabilities around the potential loss of sensitive information due to remote access to networks and the use of web-based applications; increased use of personally owned devices; and changes in controls over physical records, such as sensitive documents printed at remote locations and the absence of personnel at firms’ offices, according to the alert.

Financial Conflicts of Interest

According to the alert, the recent market volatility and the resulting impact on investor assets and the related fees collected by Firms may have increased financial pressures on Firms and their personnel to compensate for lost revenue. While these incentives and related risks always exist, the current situation may have increased the potential for misconduct.

COVID-19 may have increased the potential for misconduct regarding financial conflicts of interest, such as taking loans for investors or clients, recommending retirement plan rollovers to IRAs, workplace plan distributions, and retirement account transfers into advised accounts or investments in products that the firms or their personnel are soliciting; or up-front charges or mutual funds with higher cost share classes when lower cost share classes are available.

Free consultation with a Securities Attorney

If you are concerned about your investments with your financial advisor, the securities attorneys at the White Law Group may be able to help you. Please call the offices for a free consultation with  one of our securities attorneys at 888-637-5510.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Franklin, Tennessee. The firm works on a contingency fee basis and may be able to represent you in a complaint against your brokerage firm.

For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visit https://whitesecuritieslaw.com.