Never Been Examined by the SEC? Look in the Lobby

SEC Seal 2

With the flood of new registered investment advisers after the enactment of Dodd-Frank, the Securities and Exchange Commission launched the presence exam program. The goal was to get to a big chunk of the newly registered fund managers. What got left out was the big chunk of investment advisers who had never been examined. That is about to change.

The SEC announced a new initiative directed at never-before examined registered investment advisers. It looks a lot like the presence exams.

The letter highlights five high-risk areas that are likely to be the focus of the exam:

  1. Compliance program
  2. Filings/disclosure
  3. Marketing
  4. Portfolio management
  5. Safety of Client assets

The presence exam initiative was planned to have a two year life and that life is just about expired. The SEC’s exam priorities for 2014 identified the never-before examined as a priority area for the SEC this year. So it’s no surprise that this new initiative is being rolled out.

The only surprising thing is that it lacks a snappy title like “presence exam.” The “Never-Before Examined Initiative” lacks pizazz.

Letters were sent out this week. So if you fit into that category of advisers who registered before 2011 and have not had an SEC exam, look in the mail for your letter.

What can you do if you get one of the letters? Prepare for the exam. Grab one of the sample SEC request letters and give yourself a week to pull the information together.


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