SEC Scrutinizing Advisers transitioning from BD model to IA model

Advisers transitioning from wirehouses and independent broker-dealers must heed a warning from the SEC contained in its 2022 Examination Priorities that is pertinent to their transition.  The SEC noted that it will be scrutinizing whether advisors migrating from the broker-dealer model to the investment adviser model have evaluated their existing client accounts to determine whether it is in the client’s best interest to move from a brokerage account to an advisory account. As such, it will be important for transitioning advisors to evaluate the type and frequency  of services and investments currently offered and to be offered for each client and to document why, if applicable, it is advisable for the client to move from a brokerage account to an advisory account. Of course, client preferences should be solicited and documented in such analysis.  The failure to demonstrate that an adviser conducted such an evaluation could lead to allegations that the adviser breached its fiduciary duty of care to its clients.

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