SEC Releases Risk Alert on EXAMS Process
On September 6, 2023, the SEC Division of Examinations (EXAMS) released a Risk Alert highlighting critical areas of interest to any investment adviser—including how EXAMS selects what firms to examine, how EXAMS selects examination focus areas and how EXAMS selects documents to request. Unlike the annual “Examination Priorities” reports—which include lengthy discussion of the SEC’s priorities in the abstract—here, in just three pages, EXAMS describes its examination selection process in concrete, digestible detail.
The Risk Alert provides a further level of insight and transparency with a summary of document requests, or “Typical Initial Information Examiners Request of Investment Advisers,” broken down into four high-level topics areas:
- “General Information” such as organizational structure.
- “Information Regarding the Compliance Program, Risk Management, and Internal Controls” such as compliance policies and procedures, valuation process and cybersecurity incidents.
- “Information to Facilitate Testing with Respect to Advisory Trading Activities” such as advisory client account information, securities held in client portfolios and code of ethics policies and procedures.
- “Information to Perform Testing for Compliance in Various Areas” such as marketing materials, cash flow statements and auditor opinions.
The full text of the Risk Alert is available here, and worth the read.
