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By the Office of Compliance Inspections and Examinations (OCIE)1

Volume IV, Issue 6 June 22, 2015 

Retirement-Targeted Industry Reviews and Examinations 

Initiative

I. Introduction

Earlier this year, OCIE announced that its 2015 Examination Priorities 

includes a focus on “examining matters of importance to retail investors 

and investors saving for retirement.”2

 Consistent with this priority, 

OCIE is launching a multi-year Retirement-Targeted Industry Reviews 

and Examinations (ReTIRE) Initiative.

II. Background

Many retail investors, including advisory clients and brokerage 

customers, are more dependent than ever on their own investments for 

retirement.

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 OCIE is focusing on retirement-based savings in 

recognition of the complex and evolving set of factors that retail 

investors face when making such investment decisions. Some of these

factors include the broad and changing array of investments available

and services offered and the changing market environment. OCIE, through the National 

Examination Program (NEP), will conduct examinations of SEC-registered investment advisers 

and broker-dealers (collectively, registrants) under the ReTIRE Initiative that will focus on 

certain higher-risk areas of registrants’ sales, investment, and oversight processes, with particular 

emphasis on select areas where retail investors saving for retirement may be harmed.

 1 The views expressed herein are those of the staff of OCIE, in coordination with other staff of the Securities and 

Exchange Commission (SEC or Commission), including staff of the Division of Investment Management and 

the Division of Trading and Markets. The Commission has expressed no view on the contents of this Risk 

Alert. This document was prepared by the SEC staff and is not legal advice.

2 OCIE, “Examination Priorities for 2015” (January 13, 2015).

3 See Pensions & Investments, “Corporate retirement plans near tipping point – Defined contribution ascendancy to 

transform how private plans do business” (February 9, 2015). As of September 30, 2014, for the top 1,000 

retirement plans surveyed, defined contribution (DC) pension plan assets exceeded defined benefit (DB) pension 

plan assets by $284 billion. Under DC plans, individual investment accounts are established and often subsidized 

by employers, but are owned and controlled by employees. This contrasts with DB plans, which are pension plans 

that pay employees a lifetime annuity, often based on years of service and final salary.

In this Alert: 

Topic: Retirement-Targeted 

Industry Reviews and 

Examinations Initiative

Key Takeaways: NEP staff 

intends to focus on certain

registered investment 

advisers and broker-dealers 

that provide services or sell 

investment products to retail 

investors. Examination focus 

areas include: reasonable 

basis for recommendations;

conflicts of interest;

supervision and compliance 

controls; and marketing and 

disclosure. 
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III. Examinations

The staff intends to use data analytics, information from prior examinations, and examinerdriven due diligence to identify registrants to examine under this Initiative. As part of the 

examinations or the selection of examination candidates, the staff may focus on the activities of 

investment advisory representatives and/or broker-dealer registered representatives (collectively, 

representatives). The risk-based examinations conducted under the ReTIRE Initiative will focus 

on the services offered by the registrants to investors with retirement accounts in the following 

areas:

• Reasonable Basis for Recommendations. Registrants have important obligations under 

the federal securities laws and SRO rules (with respect to broker-dealers) when making 

recommendations or providing investment advice.4 To the extent applicable and 

required, the staff will assess the actions of registrants and their representatives for 

consistency with these obligations when: (i) selecting the type of account;5 (ii) 

performing due diligence on investment options; (iii) making initial investment 

recommendations; and (iv) providing on-going account management.

• Conflicts of Interest. Many registrants have inherent conflicts of interest that exist as a 

result of, among other things, their business structure, compensation structure, personal

issues or relationships, or relationships with service providers. Generally, registrants may 

be expected, as applicable, to identify material conflicts of interest, to design compliance 

programs to address the risks caused by those conflicts,6 and/or to disclose material 

conflicts of interest.7

 The staff will review registrants’ sales and account selection 

practices in light of the fees charged, the services provided to investors, and the expenses 

of such services to evaluate, to the extent applicable and required, whether: (i) 

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 See, e.g., Status of Investment Advisory Programs under the Investment Company Act of 1940, Advisers Act 

Release No. 1623 (March 24, 1997) (discussing an investment adviser’s duties to clients in the context of adopting a 

final rule providing for a non-exclusive safe harbor from the definition of investment company for certain 

investment advisory programs), Registration Under the Advisers Act of Certain Hedge Fund Advisers, Advisers Act 

Release No. 2333 (December 2, 2004) (discussing the pertinent provisions of an adviser’s “fiduciary” obligations); 

Hanly v. SEC, 415 F.2d 589, 596 (2d Cir. 1969); and FINRA Rule 2111 (Suitability).

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 See FINRA, Rollovers to Individual Retirement Accounts, Regulatory Notice 13-45 (December 2013) (FINRA 

Regulatory Notice 13-45) (“A recommendation concerning the type of retirement account in which a customer 

should hold his retirement investments typically involves a recommended securities transaction, and thus is subject 

to Rule 2111. For example, a firm may recommend that an investor sell his plan assets and roll over the cash 

proceeds into an IRA. Recommendations to sell securities in the plan or to purchase securities for a newly-opened 

IRA are subject to Rule 2111.”).

6 See, e.g., Compliance Programs of Investment Companies and Investment Advisers, Advisers Act Release No. 2204 

(December 17, 2003) (Compliance Rule Adopting Release). See also Carlo DiFlorio, former Director, OCIE, 

“Conflicts of Interest and Risk Governance” (October 22, 2012); FINRA Regulatory Notice 13-45; and FINRA, 

Report on Conflicts of Interest (October 2013). 

7 For a discussion of investment advisers’ and broker-dealers’ duties relating to disclosure of conflicts of interest, see 

generally Staff of the U.S. Securities and Exchange Commission, Study on Investment Advisers and Broker-Dealers

(January 2011), at 22-24, 55-58.
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compliance programs identify and address risks associated with the conflicts of interest 

and (ii) material conflicts of interest, such as compensation structures that may 

incentivize representatives to make certain recommendations, are disclosed or otherwise 

addressed. 

• Supervision and Compliance Controls. Under applicable federal securities laws and 

SRO rules (for broker-dealers), registrants must reasonably supervise persons acting on 

their behalf and adopt effective compliance programs, which should include reasonably 

designed policies and procedures that are tailored to each firm’s business.

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 The staff will 

review registrants’ controls, oversight, and supervisory policies and procedures, as 

appropriate, and for compliance with any applicable specific requirements discussed 

therein. In addition to these review areas, the staff may focus on: (i) registrants with 

operations in multiple and/or distant branch offices and (ii) representatives with outside 

business activities.

• Marketing and Disclosure. Registrants generally must ensure that materials distributed 

to investors are not deceptive or misleading.

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 The staff will review registrants’ 

brochures, sales and marketing materials, and disclosures to retail investors to, among 

other things, validate, to the extent applicable and required, that: (i) the content of the 

materials and representations of representatives are true and accurate and do not omit 

material information where there is a duty to disclose; (ii) disclosures regarding the fees 

are complete and accurate; and (iii) credentials or other endorsements are valid and meet 

any stipulated standards.

While these are the primary focus areas for the ReTIRE Initiative, examiners may select 

additional topics based on operational and other risks identified during the examinations.

IV. Conclusion

In sharing the focus areas for the ReTIRE Initiative, the NEP’s intent is to encourage registrants 

to reflect upon their own practices, policies, and procedures in these areas and to promote 

improvements in their supervisory, oversight, and compliance programs, as deemed appropriate.

 8 See Exchange Act Sections 15(b)(4)(E) and 15(b)(6)(A) and Advisers Act Section 203(e)(6) and 203(f), which

authorize the Commission to take action against registrants and their associated persons for failure to supervise their 

personnel who violate the federal securities laws. See also Advisers Act Rule 206(4)-7 (the Compliance Rule); 

Compliance Rule Adopting Release; and FINRA Rules 3110 (Supervision), 3120 (Supervisory Control System),

and 3130(a) (Annual Certification of Compliance and Supervisory Processes).

9 See, e.g., Advisers Act Sections 206(1), (2), and (4), and Rule 206(4)-1 thereunder; Section 17(a) of the Securities 

Act of 1933; Exchange Act Sections 10(b) and 15(c) and Rule 10b-5 thereunder; and FINRA Rule 2210

(Communications with the Public). 
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This Risk Alert is intended to highlight for firms risks and issues that the staff has identified. In addition, this Risk 

Alert describes factors that firms may consider to (i) assess their supervisory, compliance and/or other risk 

management systems related to these risks, and (ii) make any changes, as may be appropriate, to address or 

strengthen such systems. These factors are not exhaustive, nor will they constitute a safe harbor. Other factors 

besides those described in this Risk Alert may be appropriate to consider, and some of the factors may not be 

applicable to a particular firm’s business. While some of the factors discussed in this Risk Alert reflect existing 

regulatory requirements, they are not intended to alter such requirements. Moreover, future changes in laws or 

regulations may supersede some of the factors or issues raised here. The adequacy of supervisory, compliance and 

other risk management systems can be determined only with reference to the profile of each specific firm and other 

facts and circumstances.