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The Markets Annual Review

Trade wars, midterm elections, and market volatility highlighted 2018 for investors. In an attempt to reduce the trade deficit, President Trump pushed to rewrite trade agreements with several long-time trade partners of the United States. Trump amended the trade agreement with South Korea, imposed tariffs on steel and aluminum, and renegotiated the North American Free Trade Agreement (now called the United States-Mexico-Canada Agreement). But the trade war with China has been the most compelling and impactful, not only to the countries directly involved, but to much of the global economy. Reciprocal tariffs were imposed by each economic giant throughout the year. There was a temporary truce achieved following the Group of 20 summit, but there was no definitive agreement reached.

Elections in November showed how politically divided the nation is. Democrats picked up 40 congressional seats to win control of the House of Representatives for the first time since 2011. On the other hand, Republicans maintained control of the Senate. The end result is a Congress that has become more divided, at least politically. Oh, and the federal government shut down in late December due to a budgetary stalemate between President Trump and Congress, principally over funding for a border wall.

did you know?

The SEC’s Office of Compliance Inspections and Examinations (OCIE) bases its work on four basic pillars: promoting compliance, preventing fraud, identifying and monitoring risk and informing policy. Much of the SEC’s work concerns RIAs who, in 2018, counted for some $84 trillion in assets under management. Additionally, more than 3,700 advisors have over $1 billion in assets under management. With this amount of activity taking place, the SEC’s investigators were busy last year:

• In 2018, the SEC completed more than 3,150 examinations, a 10% increase over 2017
• Examinations led to more than 160 enforcement referrals, resulting in firms returning more than $35 million to investors
• In 2018, the SEC examined roughly 17% of the nation’s RIAs

bright ideas
2019 SEC Examination Priorities
What Advisors Need to Know About Retail Investor Compliance

The SEC’s Office of Compliance Inspections and Examinations (OCIE) recently issued its examination priorities for 2019. Those priorities are very similar to the 2018 priorities, with one notable change coming from digital assets and blockchain receiving their own category this year. In the following paragraphs, we’ll highlight key points from the SEC’s 2019 priorities, but first, let’s discuss what’s on the mind of many advisors.

The Federal Shutdown
As of this writing, the federal government shutdown remains in place and advisors have been asking us, “How does the government shutdown affect SEC examinations?” The SEC released a statement recently saying they “will have a very limited number of staff members available.” They also said the government impasse will limit the number of examinations that they’re able to conduct, and when they do conduct examinations, they’ll often be limited to a quick phone call instead of an onsite examination.

However, for advisors, it should be business as usual, and that means remaining compliant and always acting in a client’s best interest. To help achieve that goal, let’s take a look at where the SEC is focusing for 2019.

SEC Priorities
For 2019, the SEC has targeted six key risk areas as its main priorities:

1. Matters of importance to retail investors, including seniors and those saving for retirement

2. Compliance and risk in registrants responsible for critical market infrastructure

3. Select areas and programs of FINRA and MSRB

4. Digital Assets

5. Cybersecurity

6. Anti-Money Laundering

Retail Investors
Of the six listed, the one that really impacts Beacon and most of our advisors is retail investors, including seniors and those saving for retirement. This topic is at the core of an advisor’s fiduciary responsibilities and the SEC has outlined key areas of focus regarding retail investors.

Fees and Expenses. The SEC will be looking closely at fees and expenses to see if advisors are transparent in their transactions and are properly disclosing investment costs to investors. Of particular note will be wrap fee programs and how fees are bundled.

Conflicts of Interest. The SEC will also continue to zero in on conflicts of interest and will investigate relationships between investment advisors and broker-dealers as it relates to compensation arrangements and financial incentives.

Never-Before or Not Recently-Examined Investment Advisers. If you’ve never had an SEC examination or you have recently filed as an RIA, you can expect that you’re going to get examined within the first 18 months to two years. Also, if you haven’t been examined in the last five years, you can expect an examination in the near future because the SEC likes to check in at least once every five years.

The Bottom Line
No matter where you are in your business life cycle, you can expect to have an SEC examination is in your future. At Beacon, we have developed policies and procedures that you can implement and test to help ensure you are following the SEC guidelines. If you want to learn more about those tools and have a deeper understanding of how to prepare for an SEC examination, contact your wholesaler today!

Additional Resources

2019 SEC Examination Priorities

Top 10 Tips to Help You Prepare for Your RIA Regulatory Audit

How an RIA Firm Can Create a Culture of Compliance

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Be sure to visit Beacon’s News & Press page for the latest credibility pieces to share with your clients and prospects, and follow Beacon on LinkedIn for the latest updates as they happen.

“Now’s a good time to assess whether your objective is maximizing profits or protecting assets from losses,” says Chris Cook, founder and president of Beacon Capital Management.

— NASDAQ “Investment Strategies for 2019: How to Conquer Q1”



Beacon Capital Management, Inc. is a registered investment adviser with the Securities and Exchange Commission. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Past performance is not indicative of future performance.

Additional information about Beacon Capital Management is also available on the SEC’s website at under CRD number 120641. Beacon Capital Management only transacts business in states where it is properly registered, notice filed, or excluded or exempted from registration or notice filing requirements.

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