How to Prepare for a Successful SEC Exam

Advisers & Funds

You have undoubtedly seen that the SEC has released its 2015 examination priorities. Always with our eye toward our adviser and fund clients, the Vista360 team has picked out the items we think are most relevant to you. When we conduct Mock SEC Exams for our clients we have found taking a holistic approach results in the best outcomes. While we certainly consider the SECís current priorities, we also consider what we observe the SEC focusing on during actual examinations (not always the same as their priorities) and the risks inherent in our clientís business practices. Consider taking a similar approach. We recommend conducting mock interviews designed to give your staff an understanding of the types of questions the SEC asks as well as the style in which they conduct those interviews. When we conduct mock interviews, the most critical part of our interview process is the feedback we give to staff during and after the interview. Staff members walk away feeling more prepared because they were able to experience the process in a low stakes environment while learning how to frame their responses so that the SEC staff are able to get the information they need and move on to the next topic.

Below is a summary of our thoughts on preparing for an SEC exam in light of the recently released 2015 exam priorities.

None of the 2015 exam priorities are earth shattering Ė most have either been articulated exam priorities in the past or highlighted by the SEC in speeches, bulletins and alerts. While the priorities are organized around three themes: 1. Matters of importance for retail and retirement investors; 2. Market wide-risks; and 3. Use of data analytics to identify registrants for examination, embedded within these themes, we see the SEC continuing to focus on the following topics:

  • Fees and expenses Ė an oldie, but a goodie. Whether you are a private equity firm, charge performance based fees, sponsor a wrap program, offer various products with different fee arrangements, or have the most straightforward of fee billing practices, fees are a continuous area of SEC focus. Our advice is to review your actual practices against your disclosures. Ask yourself do they match up, are they understandable, is there anything missing? Perform periodic testing so you can identify potential issues before an exam.
  • Cybersecurity Ė the new kid on the block (at least from an SEC perspective). On February 3 the SEC published a Risk Alert summarizing their observations from their sweep of advisers and brokers. Unfortunately, the Risk Alert did not provide much in the way of advice or best practices for advisers. So, how should you prepare? At a minimum, review the document request list included in the SECís April 2014 Risk Alert announcing the cybersecurity sweep and use that as a starting point for assessing your cybersecurity preparedness, identifying potential gaps and developing an action plan to address your primary risks. This should position your firm to be able to talk to regulators about your risks and overall control environment during an exam.
  • Data Analytics Ė big brother. The SECís ability to gather and analyze data has increased exponentially in recent years, and they plan to exploit their new capabilities to the fullest. How do you prepare for this? When the SEC reviews your firmís trade data and patterns, what will stand out? When the SEC reviews your firmís regulatory filings, what trends will be evident? What information might the SEC glean from changes in your filings? Where are your biggest risks? Do you have staff with disciplinary history? Do you manage multiple products in the same strategy? Do you have an increasing number of errors? Leverage your knowledge of your firm and your data to demonstrate that you recognize you have risks and conflicts, but that you have developed a control environment to mitigate those risks, including a thoughtful education process that shares that knowledge across the firm. Your staff will be best prepared for an exam if they understand where your risks are, and what is done to mitigate those risks.
As always, we welcome your feedback and comments.

If you would like to talk with us about your needs, please contact Laura Rauman at
414-935-6361 or

OCIE Examination Priorities for 2015
February 2015 Cybersecurity Examination Sweep Summary
April 2014 OCIE Cybersecurity Initiative Risk Alert








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