The Dirty Dozen: Twelve Ways to Survive an SEC Examination


It starts with a phone call. An SEC examiner’s office telephones your firm to let you know that you will be subjected to a thorough review. About a week later, you get a more formal letter that asks you for documents that may include trading records, compliance manuals, client lists, investment records, employee files, financial reporting, cyber security policies and vendor contracts. Your firm will generally have a week or two to prepare and send these documents, and then the SEC examiner will come to your office. There they will set up shop in an empty conference room and begin their onsite review process that will likely include more document requests and interviews with key staff. At the end of this process you will get a letter outlining areas where compliance policies or procedures need improvement.

The good news is that only about 8% of SEC examinations uncover problems serious enough to be turned over to enforcement. The bad news is that, if handled poorly, these examinations can drag on for weeks or months, taking up time and resources that might otherwise be dedicated to growing your business. However, if you approach the examination process in the right way, it can yield useful insight into how to manage the risks of your business.

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