As SEC Onsite Exams Hit Fever Pitch, Here’s What RIAs Need to Know

Exams by the Securities and Exchange Commission that include an onsite portion “are back in full swing,” according to Amy Lynch, founder of FrontLine Compliance. RIAs should expect the SEC to visit “as it aggressively pursues its goal of conducting more exams,” Lynch said.

What’s triggering more exams?

“An election year urgency and unprecedented new and proposed rules,” according to Lynch. “Plus, firms not having an SEC exam within the last four years should expect one.”

In March, the SEC said that it would start returning to onsite exams.

“We have been seeing an uptick in SEC exams overall,” Lynch told ThinkAdvisor on Friday. “All SEC exams now have an onsite component. The only question is when and for how long they are onsite.”

SEC Chairman Gary Gensler ”is feeling the pressure now since his term could be ending, which is why recent staff changes were made in the Division of Exams,” Lynch said in an email. “The pressure is on to get exams done for FY 2024.”

Which type of firms have not been examined in four years?

“Many new registrants have still not been examined,” Lynch said. “In four years, an RIA can go through many changes by offering new products and services, growing staff, merging, acquiring, etc.”

An exam of a firm “can change and look very different under these circumstances,” Lynch continued. “So, just because a firm had a clean exam 4 years ago, does not mean it will happen again if the firm were examined today.”

While budget constraints hamper the SEC’s ability to “ever be fully staffed, especially when the industry is growing so fast,” Lynch said, “onsite exams are definitely shorter than they used to be; lasting days as opposed to weeks. Video communications in the post-pandemic world have changed how onsite exams are conducted.”