SEC Adviser Exams: What to Expect When an Examiner Comes Knocking

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Given recent statements by the SEC Chairman Mary Jo White, the SEC is committed to increasing adviser oversight through compliance exams. It is no longer a question of “if” they will come knocking, but “when.”

An SEC examination can be stressful and unnerving; at minimum it is somewhat disruptive. To help ease the uncertainty and make sure you are in the best position to come through the exam unscathed, it helps to know what to expect.

To start, the SEC’s stated goal when conducting examinations is to determine whether the firm is:

Conducting its activities in accordance with the federal securities laws and rules;

Adhering to the disclosures it has made to investors; and

Implementing supervisory systems and/or compliance policies and procedures that are designed to ensure that the firm’s operations are in compliance with the law. What that means in Plain English is that firms need to have something in place that is actually reflective of their business practices. I am always caught by surprise how often this is NOT the case.

In many cases, firms will receive a letter announcing the examination and requesting information or documents pre-visit.

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Published In: Business Organization Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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