Securities and Trade Fee exams could be nerve-racking for RIAs, notably given the extra aggressive tone the SEC has adopted lately.
Nonetheless, they’re an inevitability for these funding advisors registered with the SEC. It behooves RIAs to make sure they’re ready for such exams given the extreme penalties that may come up for not being ready.
Because the saying goes, “Those that fail to arrange have to be ready to fail.” Adopting the next 5 greatest preparation practices doesn’t assure that an advisor will undergo an examination unscathed, however they’ll virtually inevitably profit the RIA.
1. Assessment Annual Examination Priorities and Different SEC Steerage
RIAs ought to make sure that they’re accustomed to latest steerage from the SEC relating to its precedence focus areas for exams.
In recent times, the SEC has printed a big quantity of formal and casual steerage on what matters they’re most targeted on when analyzing RIAs. Such steerage takes many kinds, together with the annual publication of the SEC examination priorities for the upcoming yr, periodic threat alerts highlighting particular points elevating issues as recognized by the employees in latest examinations of funding advisors, and employees bulletins on particular compliance matters.
Though SEC exams usually are not uniform and might differ amongst department places of work and even particular person examination groups, the above publications spotlight the matters prone to garner essentially the most scrutiny in exams. Subsequently, RIAs ought to turn into accustomed to such regulatory updates to make sure that their corporations are correctly addressing the highlighted points and deficiencies.
2. Turn out to be Acquainted With SEC Doc and Data Requests
RIAs ought to turn into accustomed to the forms of data and paperwork which might be being requested in latest SEC exams and make sure that advisors have all such data and paperwork and that they’re readily accessible. By the use of background, the SEC evaluations an RIA by initially requesting important volumes of details about the agency’s enterprise and compliance program.
The SEC not too long ago printed a threat alert that included a doc highlighting among the typical data and paperwork the employees requests from funding advisers on the outset of an examination. Ideally, the SEC will proceed to replace this listing because it evolves. Even when the SEC doesn’t replace it, advisors can attain out to corporations that commonly information advisors by means of the SEC examination course of to know what data and paperwork the SEC has been requesting in latest exams.
By understanding what paperwork the SEC employees is requesting, RIAs can evaluate their compliance books and data and make sure that they’ve all such books and data. RIAs could wish to create a folder by which such data and paperwork could be housed for simpler retrieval within the occasion the SEC comes knocking.