Conquering Current Compliance Challenges
June 12, 2019 | 2:00 - 2:30 PM EST

Conquering Current Compliance Challenges
Recorded: May 15, 2019 
Includes: Best Practices, Key Regulatory Issues and Compliance Tips
Includes: 23 Best Practices, 5 Peer-tested tools and 15 No Action Letters

Cybersecurity Strategies to Ensure SEC Compliance, 2nd Edition
Includes: 24 Best Practices, 16 Tools, 4 Risk Alerts and IM Guidance


The SEC’s Office of Compliance Inspections and Examinations is tasked with examining the nearly 12,000 SEC-registered investment advisers.  All the records of a registered adviser are subject to examination by OCIE staffers.
The National Exam Program has adopted a risk based approach whereby those firms deemed “high risk” are the most likely to be subject to an exam.  When assigning a “low,” “medium,” or “high” risk profile, the first thing the SEC is looking at is the data you are reporting on Form ADV.  Other data elements are then added, such as:

  • the date of a firm’s last SEC exam;
  • visits from other regulators;
  • regulatory filings (inconsistencies raise a red flag);
  • operational “red flags” (eg. a new business line was added);
  • input from other SEC divisions;
  • whistleblower tips;
  • reports in the news media; and
  • third-party databases (eg. on performance data).

Exam types and focus

The types of examination conducted by OCIE can vary but generally consist of routine examinations, sweep exams on a specific focus area, “for cause” exams and never before examined firms exams.  Exam priorities similarly can vary from year to year but are now revealed in the SEC’s annual letter detailing its Exam Priorities.  Another best practice to be aware of SEC focus areas and to prepare for an exam is to secure current SEC document request letters that firms are receiving to gain a sense of the laundry list of documents that the Commission is seeking.
There is no regular schedule that you can rely on when it comes to SEC exams.  The SEC plans to move from examining 10% of the SEC-registered IA population in a given year to 14% and the Commission is actively reviewing the potential for third-party examiners to move the needle even further forward.  Bottom line:  the likelihood of being examined by the SEC is ever increasing.

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