-
Digital Assets – The Bureau will review registrants’ recommendations to purchase investments in digital assets. The Bureau will review transactions for suitability, and the Bureau will examine a registrant’s WSPs and Form ADV disclosures. Furthermore, the Bureau will examine a registrant’s due diligence prior to the recommendation of investments in digital assets.
-
Leveraged and/or Inverse Exchange-Traded Funds (ETFs) – The Bureau will continue to focus on the recommendation of leveraged and/or inverse ETFs. Specific areas of review will include:
- The length of time leveraged and/or inverse ETFs are held in a client’s portfolio;
- The suitability of the ETF for the client, including the client’s age, net worth, investment experience, investment objective, and risk tolerance;
- Proper disclosure of the investment strategy utilizing the leveraged/ inverse ETF on the Form ADV;
- Maintenance and enforcement of written supervisory procedures (“WSP”) that are reasonably designed to achieve compliance with the Pennsylvania Securities Act of 1972; and
- Disclosures of material risks to clients.
-
Custody – The Bureau will review all situations where an investment advisor has custody of client assets, particularly those in which an investment adviser deducts client fees directly from a client’s account, is the trustee of a trust, participates in standard letters of authorization, or is the general partner of a pooled investment vehicle (“PIV”). An investment adviser’s Form ADV should be current and should disclose all custody arrangements.
-
Pooled Investment Vehicles - The Bureau will focus on investment advisers who advise PIVs. The Department will analyze a PIV’s offering documents, disclosures, conflicts of interest, suitability, advertising, and compliance with the Department’s custody regulations.
These priorities are not an exhaustive list of the examination areas of the Bureau.