Advisers: Are You Prepared for a Regulatory Exam?

Adequate preparation for a SEC review of your brokerage firm is becoming increasingly complex. Recently, additional documents are requested, among of which include questions regarding risk management from the standpoint of investment and portfolio management as well as risk relative to operational and compliance.

To approach answers to these questions, it is advisable that firms perform an annual risk assessment as part of their annual CCO review. These reports will need to be provided to the SEC during a regulatory exam. The frequency and scope of regulatory reviews coincides with how well the SEC believes the advisor’s risk profile is maintained and understood by the firm itself. Naturally, regulators will want to review issues that represent the greatest threat to investors. Additionally, the best way to prepare for a regulatory exam is to perform mock audits. Mock audits will allow the firm to recognize what documents or issues that they need to be able to produce before an actual regulatory exam. Furthermore, it will allow the firm to understand which items are not applicable or required. If a firm is fully prepared for a regulatory exam and can provide all the necessary information to regulators then the frequency and scope of their exams will substantially decrease.

Eccleston Law Offices stands ready to assist, we have extensive experience consulting advisers in the mock audit process as well as whether they should transition. We also assist by serving as their counsel to effectuate a successful transition to a new firm and to negotiate the most favorable employment terms.  Contact us for a free consultation at (312) 332-0000.