On September 6, 2023, the SEC Division of Examinations (EXAMS) released a Risk Alert highlighting critical areas of interest to any investment adviser—including how EXAMS selects what firms to examine, how EXAMS selects examination focus areas and how EXAMS selects documents to request. Unlike the annual "Examination Priorities" reports—which include lengthy discussion of the SEC's priorities in the abstract—here, in just three pages, EXAMS describes its examination selection process in concrete, digestible detail.
The Risk Alert provides a further level of insight and transparency with a summary of document requests, or "Typical Initial Information Examiners Request of Investment Advisers," broken down into four high-level topics areas:
- "General Information" such as
organizational structure.
- "Information Regarding the Compliance Program,
Risk Management, and Internal Controls" such as
compliance policies and procedures, valuation process and
cybersecurity incidents.
- "Information to Facilitate Testing with Respect to
Advisory Trading Activities" such as advisory client
account information, securities held in client portfolios and code
of ethics policies and procedures.
- "Information to Perform Testing for Compliance in Various Areas" such as marketing materials, cash flow statements and auditor opinions.
The full text of the Risk Alert is available here, and worth the read.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
