Skip to Content

Early Preview of 2015 SEC Exam Priorities
September 16, 2014

The SEC continues to set its sights on certain types of funds that it believes may present a higher risk of conflict of interest and confusion in the way they are designed and marketed. After signaling earlier this year that it would increase its scrutiny of private equity and other private funds, Kevin Goodman, the National Associate Director of the Broker-Dealer Examination Program in the Office of Compliance Inspections and Examinations, recently indicated that sales of class L share variable annuities will also be on its radar of priorities for next year’s compliance examinations.

Of course, close regulatory scrutiny of variable annuities is nothing new. But what has now caught the SEC’s attention is "an explosion" of "L share" annuities, a class that generally has higher front end loads than most other share classes in exchange for a shorter surrender charge period. Goodman said, "We want to make sure these share classes aren’t being chosen or marketed based on the higher commissions they generate." The SEC will focus on the disclosure of the fees and costs associated with such shares, and whether they are appropriate for the investors purchasing them.

The SEC will also turn its attention on the operations of broker-dealer branch offices on a stand-alone basis and not just review whether they are being adequately supervised by the firm. Additionally, broker-dealers with a history of disciplinary problems will likely see an increase in examination activity. The official list of SEC examination priorities will be published in January 2015.
Related Practices
Securities Litigation and Enforcement
©2025 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.