An SEC examination is easier to manage when the firm can explain its business, retrieve accurate records, and show how its compliance controls operate. Preparation begins before a request arrives: the chief compliance officer needs a clear picture of the firm’s activities and ready access to the evidence supporting them.
For registered investment advisers, a practical preparation process connects disclosures, procedures, and day-to-day work. It also gives employees a clear route for handling requests and escalating questions.
Understand How the Examination Is Scoped
The SEC’s Division of Examinations uses a risk-based approach to selecting advisers and determining examination scope. Its published typical initial document request is a useful planning resource, but the actual request may differ and expand during the examination. Some examinations are unannounced.
Use the published request to identify records the firm may need to produce. Then compare those categories with your own business. A private fund adviser, a retail wealth manager, and a firm using third-party managers will have different activities to explain.
Assign Responsibility for the Response
Designate a primary examination contact and a backup. Establish who will gather records, review submissions for accuracy, answer operational questions, and involve counsel when needed. Give employees instructions for routing examiner communications promptly.
Maintain a request tracker with the exact request, responsible person, due date, status, and location of the submitted response. Preserve the original request language so that internal shorthand does not narrow what the staff asked for.
Organize Records Around Actual Business Activities
Prepare an inventory of key information: organizational structure, services, client types, investment strategies, affiliations, and systems. Identify where agreements, billing records, trading data, marketing materials, employee reports, and compliance workpapers are held.
Confirm that records can be retrieved in a usable format. Test an export from a billing or trading platform before the deadline becomes urgent. Explain field names, date ranges, and known data limitations so the reviewer can understand what the export represents.
Preserve existing records and their history. If preparation reveals a missing control or inaccurate disclosure, document the discovery and subsequent correction honestly. Do not backdate a policy, approval, or test to imply it existed earlier.
Check Whether Disclosures Match Practice
Compare Form ADV, client agreements, applicable Form CRS disclosures, and website descriptions with the way services are delivered. Focus on fees, investment authority, affiliations, referral arrangements, and other conflicts.
For example, a stated billing methodology should match the calculation used in the billing system. If a discrepancy appears, investigate its scope and address it through the firm’s compliance process rather than simply editing the document.
Test Controls Before Describing Them
Select a manageable set of higher-risk processes and trace actual examples. Recalculate fees, examine marketing approvals, review an employee trading exception, or follow a trade error through resolution. The purpose is to understand whether the control works and where its evidence is stored.
Review the annual compliance review and any outstanding remediation items. Confirm that completed actions have supporting evidence. Separate open issues from closed ones and be ready to explain their status.
Prepare Employees for Accurate Interviews
Help employees understand the examination process and locate the procedures relevant to their jobs. Ask them to describe their actual responsibilities and escalation routes. Resolve unclear ownership before it creates inconsistent explanations.
Employees should answer accurately within their knowledge. When a question requires records or another person’s expertise, identify the appropriate follow-up instead of guessing. A firm-wide script cannot substitute for an accurate explanation of the work.
Review Submissions and Manage Follow-Up
Check each response for completeness, consistent date ranges, and alignment with the request. Use an index and clear filenames. Retain the submitted version and a record of when it was provided. If a deadline or request is unclear, communicate with the staff promptly.
Following the examination, assign owners and deadlines to any required response or corrective work. Track implementation and verify that changes operate as intended. Examination preparation is most useful when it strengthens the firm’s ongoing recordkeeping and supervision.
SEC Examination Support From DFP Partners
DFP Partners provides RIA compliance consulting and outsourced CCO services. Contact DFP Partners to discuss examination preparation, compliance testing, and support for your firm’s response process.