Here’s a Way to Showcase Your Fiduciary Responsibilities

A focus on the retail investor and cyber-related misconduct resulted in a record total of $4.3 billion in disgorgements and penalties ordered by the Securities Exchange Commission in 2019. Among the Commission’s 862 enforcement actions were a $100 million fine against Facebook for misuse of user data, a $40 million penalty against Fiat Chrysler for inflating monthly sales results, and a $30 million levy involving Mylan for making a misleading disclosure.


In cases against financial advisory firms, the SEC’s Division of Enforcement’s efforts to protect Main Street investors resulted in the return of more than $135 million to harmed mutual fund shareholders. The SEC successfully developed a Retail Strategy Task Force (RSTF) to work on case generation initiatives, education, and outreach efforts.

Recognizing that prevention can serve as a complementary aspect of enforcement, the RSTF has joined the SEC’s Office of Investor Education and Advocacy on important new initiatives. They focus on engaging with teachers, veterans, and active military personnel on savings and investment, investment fees and expenses, retirement programs, and the many red flags triggered by investment fraud.

Investor education is everyone’s responsibility. Knowledge is power when it comes to relative safety and peace of mind. And there’s no such thing as a bad question when it comes to speaking candidly with your investment advisor.

Watch for These Red Flags

At Core Compliance & Legal Services, Inc. (Core Compliance), we recommend firms take a step back if they think something is too good to be true because it usually is. Firms need to beware of the promise of guaranteed returns and pressure tactics. It’s what’s called the “Madoff Syndrome” – the promise of 25% annual returns. Make sure to check your investment advisor’s background, which is public information. Practice healthy skepticism.

Even what appears to be a harmless situation at first glance can lead to serious trouble, especially on the subject of insider trading.


Take These Questions off the Table to Win Client Trust

Take a moment to help prospective clients help themselves. By using one sheet of paper, you can present yourself and your firm as good stewards and worthy of their business. Here are a few questions you can take off the table provided by, an excellent site run by the SEC’s Office of Investor Education and Advocacy, an online resource to help retail investors make sound decisions and avoid fraud. In every case below, lists websites that can be referenced to help find answers.

  • Is your investment consultant licensed? Discuss your credentials with your prospective client and make a Form-ADV proactively available.
  • Is the investment you’re about to make registered? Any offer or sale of securities must be registered with the SEC unless exempt from registration.
  • How do the overall risks compare with the potential rewards of the investment? A classic red flag is the sales pitch which promises a high return on investment with little to no risk. It’s important to remember that no investment opportunity offers the best of both worlds.
  • Do you understand the investment we’re discussing? When in doubt, follow one of legendary investor Warren Buffett’s favorite rules and don’t invest in anything you don’t understand. An investment prospectus and disclosure statement are provided with good reason. Take the time to read both carefully.
  • Do you know where to turn for additional help? Become familiar with the many sources of unbiased and helpful information that can be used when it comes to investing wisely. There are many useful tools available online and is a great place to start.

With many SEC regulations in flux, firms often find it helpful to have professionals update them on the best ways to present themselves to clients as strong fiduciaries in 2020. We’re experts in this area and would welcome the opportunity to evaluate your firm’s ongoing needs. Core Compliance can help, contact us online or at (619) 278.0020.

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