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FINRA Investor Study

Recently, FINRA published a report regarding its investor survey (FINRA Investors in the US 2016).  The report summarizes findings from an online survey addressing investor relationships with broker-dealers and advisers, investor understanding of fees charged for investment services and investor literacy.  The survey finds that a very small percentage of investors own “complex securities,” such as REITs, options and structured notes, which have been a focus of regulatory attention.  Most investors own principally individual stocks and mutual funds.  More than half of those investors surveyed rely on the services of a broker or other professional adviser for some of their investment decisions, with the percentage being somewhat higher for investors aged 55 and higher.  Approximately 16% of those surveyed use robo-advisers.  In making investment decisions, 49% expressed a preference for paper deliver of documents.  An overwhelming percentage of investors (68%) rely on information from the company in which they are investing in order to make their investment decisions.  The investor literacy component of the survey questions revealed that many investors do not have a complete understanding of concepts like short selling and buying stocks on margin, which suggests that broker-dealers and investment advisers have continued work ahead of them in terms of investor education.

 

OCIE Exam Reviews to Include Whistleblower Rule Compliance

Last week, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert dealing with the whistleblower provisions arising out of the Dodd-Frank Act. While examining registered investment advisers and registered broker-dealers, the Staff is reviewing, among other things, compliance manuals, codes of ethics, employment agreements, and severance agreements to determine whether provisions in those documents pertaining to confidentiality of information and reporting of possible securities law violations may raise concerns under Rule 21F-17 under the Dodd-Frank Act. This review is included in examinations as staff deem appropriate. This exam focus follows several recent SEC enforcement actions charging violations of Rule 21F-17 of the Commission’s whistleblower regulations.

Read more here: National Exam Program Risk Alert: OCIE Examining Whistleblower Rule Compliance