It’s never too early to read the SEC tea leaves.

The new regime at the Securities and Exchange Commission announced its first enforcement action this month, offering an early look into the agency’s playbook for the years ahead. While the regime of previous Chairman Gary Gensler mostly scrutinized institutional investors, President Trump’s appointees are expected to have a much sharper focus on smaller firms involved with retail investor frauds, and the reps that carry them out. The action, against New York-based One Oak Capital Management, involved some 180 retail brokerage accounts that were allegedly transferred into advised accounts, which came with higher fees.

“The wealth management industry will see a greater focus than it received from the last administration,” said Igor Rozenblit, a managing partner at the regulatory compliance consultancy Iron Road Partners.

Something’s Up

The SEC certainly isn’t shying away from enforcement. Churning inside portfolios is expected to be a top priority, as well as buying appropriate mutual fund share classes (not more expensive ones) for clients, according to Rozenblit. Marketing materials targeting retail investors will also be top of mind. A new report from Iron Road highlights just how the new agency’s priorities might shake out:

• Retail Investors: The victims in the One Oak case were retail investors, including elderly individuals. Protecting retail clients seems to be a clear priority, the report found, where Gensler-era enforcement cases were often focused on Wall Street institutions.
• Charging Reps: Not only was the advisory firm charged, but also the representative. The previous regime focused on firms, rather than individuals.
• Clear Fraud: Unlike Gensler cases where no obvious fraud occurred, this case involved “clear deception” that led to direct and measurable financial harm to clients.
• Simplicity: The settlement lacked the complexity often seen in institutional investor cases, Iron Road said.

If the SEC is setting its sights on retail, Rozenblit suggests advisors take a hard look at their communications. “We would advise them to re-focus and invest in their compliance programs, and particularly to make sure that their communications with their own investors is complete, accurate and compliant,” he said.

Hold the Phone. And since we’re on the topic of comms, so much for the dozens of off-channel communication cases that grabbed headlines under Gensler. Those actions involved advisors talking to clients on non-monitored lines, and netted the SEC billions of dollars in fines. Commission Hester Peirce called the campaign a “cash cow” before a congressional committee in September.

“I doubt we’ll ever see another standalone off-channel communications case again,” Rozenblit said.

Make the ETF market great again.

The latest exchange-traded fund filing is aiming to take advantage of Trump 2.0 and a new conservative administration that will certainly shape the market over the next four years. Defiance ETFs filed for an actively managed fund last week that would track seven companies positioned to benefit from a new “economic, regulatory, and policy environment.” The Defiance MAGA Seven ETF (MAGT) will focus on companies that are aligned with national security initiatives, have business models that support Trump’s political network, and likely fall in the energy, defense, infrastructure, and artificial intelligence sectors, per the filing.

It could represent a novel means for advisors and clients to take advantage of the next administration’s economics or become just another launch in a laundry list of filings trying to tap into politics.

“History has shown that playing politics within your investment portfolios can be risky,” said Ben Loughery, founder of Lock Wealth Management, adding that trying to time markets based on political cycles can easily backfire.

What’s the MAGA 7?

The MAGT filing did not list specific companies and said it will periodically rotate securities in and out of the index. While Defiance didn’t respond to specific questions, and the fund’s advisor Tidal declined to comment, there might be some clues right in the name:

• Robinhood, Williams-Sonoma, AppLovin, MicroStrategy, Tesla, Ubiquiti, and Coinbase were dubbed the “MAGA 7” by MarketWatch last month. 
• The prices of those large-cap stocks increased by the largest percentages between Election Day and Trump’s inauguration.
• The septet’s year-to-date performance is mixed: Robinhood is riding high, up almost 30%; while Tesla, run by Trump’s bosom buddy Elon Musk, has seen its share price drop nearly 10%.

Political Excitement. The MAGA 7 ETF isn’t the first product to take advantage of the pro-Trump, conservative buzz — and it won’t be the last. The Trump Media & Technology Group Corp. is looking to file six funds, including the Truth.Fi Made in America ETF, that stand to benefit from conservative policy making. In December, startup issuer Azoria announced an ETF that invests in S&P companies that shun DEI practices.

It can be easy for investors to get caught up in the excitement, but Loughery told Advisor Upside that clients are much better served by long-term, financial plans, rather than “chasing trends.”

Women are taking on more responsibility when it comes to household finances, and now, they’re the ones calling the investment shots in most families.

More than two-thirds of women, or 69%, report being their households’ primary decision-maker regarding investment choices, according to a CFP Board report published last week. That increased participation is partly a result of four in five women earning just as much, if not more, than their partners. It’s also a reminder that when working with clients, advisors need to communicate equally to both partners in meetings (or Zoom calls).

“We’re seeing an evolution to more confident women who are taking the lead in investment decisions,” said CFP Board Chair Liz Miller.

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