A Compliance Officer's Best Tools and Tips for the SEC Exam Process
On September 13, MyComplianceOffice co-hosted a webinar with Milne Legal. Our presenters Dustin Milne, Charles Lerner and Laetitia Mantel discussed what an investment advisory firm outside of the US needs to consider when dealing with the US. This included discussions on what defines a US person, when to register with the SEC, how to handle a SEC exam and what sort of compliance program you should have in place.
You can download a full copy of the slides from this webinar.
Full video transcript available below:
This brings us now to the last point on the agenda, preparing for an SEC examination. I'm handing the mic to Charles Learner.
Thank you. I'm going to focus on three areas. One is what to do before an examination, notice before the examiners come to you. Secondly, how you deal with the examination itself, and thirdly delve into a couple of the issues that are more hot button issues.
Before the SEC comes in, they try to do some sort of risk analysis to determine what advisers to look at. In the case of a non-U.S. adviser, I think they would look at a couple things. One, your size, whether you have an office in the United States, number of employees, your potential conflicts ... Do you have a custodian that's affiliated? Potential conflict. Do you have an affiliated broker dealer? Potential conflict. To see what those potential conflicts are.
They may come in for looking at a specific issue. They may get it from a news story or an area. There are a number of things. One of the other things to point out is to be prepared. The SEC publishes, and they're available many places on the internet, document request lists. The most expansive one has maybe 50, 60 items. You want to get that list, you want to go through that list. I have clients who put it in an excel spreadsheet. Where is that item and who is responsible for it? If they want to know a list of employees, your journals, your checks, marketing material, emails ... Where are those documents so that you don't have to scramble around?
The other thing is I would have it on a ready opening presentation materials, like a PowerPoint slide. The same kind of thing that you might do for a client. In the introduction, you're going to want to use this.
In the examination itself; there are various kinds. There can be a Sweep: they look at a topic. A short form one, which is Presence. Specifically looking at a Cause, an area to come in. Maybe looking at insider trading. Or a Full one, an up, the down, looking at the place.
They'll call you, let you know, give you two weeks to produce the documents to a secure server. They'll come on site. What you'll do is give them a tour of the office. You'll use that opening presentation materials and it should be presented by the most senior people in your firm. The most senior people in the firm. It shows that you take the examination seriously and you're showing due respect.
I had a client where the two main partners did the presentation. The examiners that were there for five weeks. They never spoke to those two people again. They talked to other people in the firm; they thought they had got enough from that.
The keystone is the CCO. Setting good tone of openness with the examiners, touching base with them, do they have what they need? There'll be interviews. At the end of each interview there'll be document quests that will flow out of that, very natural as they delve into more materials.
This webinar was co-hosted with Milne Legal. To learn more visit www.milnelegal.com