Bank sweeps, payment for order flow: What regulators are looking at in 2020
Bank sweeps, payment for order flow, digital assets — they’re all under scrutiny this year by the SEC and FINRA, according to 2020 examination priority reports the regulators released this month.
With Regulation Best Interest taking force at the end of June, regulators will evaluate how firms are adjusting their procedures. Also in the spotlight are recent industry changes, such as the host of brokerages that dropped trading commissions, and whether it will impact order-routing practices.
At the same time, regulators remain focused on issues they have highlighted in former years: advice to elderly clients, cybersecurity and private investments.
Yet despite regulators’ augmented to-do list, oversight at the SEC was down last year. OCIE completed 3,089 examinations in 2019 — a 2.7% annual decrease from 2018. The regulator said this was a minor decrease in light of the government shutdown, which suspended “virtually all examination activity.”
Going forward, the SEC stated concern that it lacks “sufficient resources” to adequately monitor the ever-growing number of RIAs. According to the SEC, within the last five years the number of RIAs has grown to 13,475 with $84 trillion in assets, from 11,500 with $62 trillion in assets.
“OCIE’s coverage rates will likely not keep pace with the continued growth in the population and complexity, without corresponding staffing increases,” the report reads.
The SEC examined approximately 2,180 RIAs in 2019, about 15% of the channel.