The SEC’s Never-Before Examined Initiative: Are You Ready?


The SEC’s Never-Before Examined Initiative: Are You Ready? On January 9, 2014, the Securities and Exchange Commission’s (the “SEC’s”) Office of Compliance Inspections and Examinations (“OCIE”) published its 2014 National Exam Program (“NEP”) priorities on February 20, 2014, which included never-before examined investment advisers. OCIE announced details regarding its initiative to conduct risk-based and focused examinations of these advisers (the “NBE Initiative”). The NBE Initiative is separate from OCIE’s “Presence Exam” initiative, which is directed at private fund advisers that were required to register following the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The NBE Initiative will particularly focus on advisers that have been registered three or more years without being subject to an exam. In a letter sent to registered investment advisers that the SEC has identified as having never been examined, Jane Jarcho, the National Associate Director IAIC Examinations, explained that the NBE Initiative will include (1) risk assessment exams and (2) focused reviews.

Risk Assessment Exams Risk assessment exams are intended to provide the SEC staff with a better understanding of registrants. These types of examinations will consist of high level reviews of an adviser’s compliance program and other essential documents so that the examiners can assess the representations made in the adviser’s disclosure documents.

Originally published in the IAA Newsletter - March 2014.

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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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