SEC unveils plan to investigate never-before-examined RIAs

Commission spells out activities it will focus on during exams

Feb 20, 2014 @ 2:22 pm

By Trevor Hunnicutt

The Securities and Exchange Commission on Thursday revealed new details about its plan to inspect registered investment advisers who have never previously been examined.

“The Never-Before Examined Initiative includes two distinct approaches: risk assessment and focused reviews,” according to a letter sent to the unexamined advisers. “The risk-assessment approach is designed to obtain a better understanding of a registrant. This type of exam may include a high-level review of an adviser's overall business activities, with a particular focus on the compliance program and other essential documents needed to assess the representations made on disclosure documents.

The focused review will examine “advisers' compliance programs, filings and disclosure, marketing, portfolio management, and safekeeping of client assets,” the statement said.

Officials with the regulator announced last October a plan to make examining the estimated 4,000 advisers who have never been visited by regulators an enforcement priority this year.

The commission's Office of Compliance Inspections and Examinations will zero in on about half of the firms that have never been examined, a group that includes those that have been registered for more than three years and are based in the United States.

On Thursday, the SEC said it would examine “a significant percentage” of the advisers.

Later this year, the SEC will host “regional meetings where [advisers] can learn more about the examination process.”

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