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Securities and Trade Fee exams might be nerve-racking for RIAs, significantly 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. Overview Annual Examination Priorities and Different SEC Steerage
RIAs ought to be certain that they’re conversant in current steerage from the SEC concerning its precedence focus areas for exams.
In recent times, the SEC has printed a big quantity of formal and casual steerage on what subjects they’re most targeted on when analyzing RIAs. Such steerage takes many varieties, together with the annual publication of the SEC examination priorities for the upcoming yr, periodic danger alerts highlighting particular points elevating issues as recognized by the workers in current examinations of funding advisors, and workers bulletins on particular compliance subjects.
Though SEC exams usually are not uniform and may fluctuate amongst department places of work and even particular person examination groups, the above publications spotlight the subjects more likely to garner probably the most scrutiny in exams. Due to this fact, RIAs ought to turn out to be conversant in such regulatory updates to make sure that their corporations are correctly addressing the highlighted points and deficiencies.
2. Grow to be Acquainted With SEC Doc and Info Requests
RIAs ought to turn out to be conversant in the kinds of data and paperwork which can be being requested in current SEC exams and be certain that advisors have all such data and paperwork and that they’re readily accessible. By means of background, the SEC opinions an RIA by initially requesting important volumes of details about the agency’s enterprise and compliance program.
The SEC just lately printed a danger alert that included a doc highlighting among the typical data and paperwork the workers requests from funding advisers on the outset of an examination. Ideally, the SEC will proceed to replace this checklist because it evolves. Even when the SEC doesn’t replace it, advisors can attain out to corporations that usually information advisors by means of the SEC examination course of to grasp what data and paperwork the SEC has been requesting in current exams.
By understanding what paperwork the SEC workers is requesting, RIAs can evaluate their compliance books and data and be certain that they’ve all such books and data. RIAs might wish to create a folder wherein such data and paperwork might be housed for simpler retrieval within the occasion the SEC comes knocking.
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