Norm Champ, the Director of the SEC’s Division of Investment Management, spoke at the ICI’s 2014 Mutual Funds and Investment Management Conference in Orlando, Florida about a variety of topics.
He first discussed the recent re-organization of the Division, which now has four groups:
- Chief Counsel’s Office;
- Rulemaking; and
- Business Operations.
Next, he discussed the Division’s newly created Risk and Examinations Office (REO), which is a multi-disciplinary office staffed with analysts with quantitative backgrounds, examiners, lawyers and accountants. REO maintains a monitoring program that provides ongoing financial analysis of the investment management industry, with a particular focus on strategically important investment advisers and funds. REO analyzes information from regulatory reports, third party providers and other sources.
Director Champ then spoke about the Division’s rulemaking initiatives. He stated that this office now takes a four factor approach to rulemaking that considers:
- the risk or risks to be mitigated by the proposed rulemaking.
- the urgency associated with a particular initiative;
- the potential impact of an initiative on investors, registrants, capital formation, efficient markets and the Division’s and the SEC’s operational efficiency; and
- the available resources associated with a policy initiative or freed up by the initiative.
He then reviewed the rules the Division adopted in 2013 and updated the audience on the rules that might be proposed or adopted in 2014. He also spoke about the Guidance Updates that the Division issues from time to time.
One issue highlighted by Director Champ is the migration of individual investors from brokerage accounts to advisory accounts. He stated that the Division will continue to monitor this trend and evaluate the impact of this migration on investors. He noted that OCIE will examine the significant risks to investors presented by dual registrants’ conflicts, including risks from migration of accounts for the purpose of generating fees with little benefit to clients. Director Champ stated that dual registrants should consider whether the recommendation to move from a brokerage account to an advisory account is consistent with fiduciary obligations and whether the move is in the client’s best interests.
Director Champ also spoke about the risks advisers confront regarding cyber attacks. He called for advisers to engage in appropriate planning to address cyber security and to have a rapid response capability that can mitigate the impact of any such attacks.
Please click here to access his speech.