Earlier this year the Securities and Exchange Commission (“SEC”) National Exam Program (“NEP”) published its Examinations Priorities for 2014. “Dual Registrants” was listed as one of the most significant initiatives across the entire NEP. This is the second year in a row that the NEP has referenced dually registered investment advisers and broker-dealers in its published examination priorities. This focus does not only apply to firms that have both a broker-dealer registration and an investment adviser registration but it extends to any investment adviser firm whose representatives are also licensed as representatives with a broker-dealer. The 2014 release indicates that, “The convergence among broker-dealer and investment adviser representative activity continues to be a significant risk. For example, representatives of dual registrants, i.e., registrants that are both broker-dealers and investment advisers, and affiliated advisers and broker-dealers may influence whether a customer establishes a brokerage or investment advisory account. This influence may create a risk that customers are placed in an inappropriate account type that increases revenue to the firm and may not provide a corresponding benefit to the customer.”

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