Surprise, Surprise: SEC Conducting Unannounced Exams

The Boston Regional Office of the SEC has recently conducted roughly 20 unannounced visits to registered investment advisers in the region. This fact, confirmed during the recent meeting of the New England Broker-Dealer and Investment Adviser Association (NEBDIAA), is in keeping with the SEC’s renewed focus on a more robust examination program.

While onsite, the SEC has spoken with chief compliance officers and occasionally made document requests. Kevin Kelcourse, associate director for the SEC Boston Regional Office, has already recently confirmed that these surprise examinations are intended to catch advisers off-guard and prevent them from remedying potential violations before the SEC arrives.

During the recent NEBDIAA meeting, custody was noted as one of the focus areas of the surprise exams. There also appeared to be an early trend of examiners focusing on private equity firms as well as never-before-examined advisers.

At the moment, it is unclear whether other regional offices will follow Boston’s lead. It is important to be prepared for such an exam, though. Some steps that can be taken to ensure preparedness include:

  • Preparing a PowerPoint intended to welcome the SEC and showcase the adviser’s commitment to compliance;
  • Conducting a self-mock audit and identifying and locating necessary documents; and
  • Prepping employees for SEC interaction.

We will continue to keep you updated as new information becomes available.

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