At a glance
- The document covers each stage of an exam, from the risk assessment that opens the process through the disposition letter that closes it, and it adds practical tips and resources for preparing for an exam and staying current on compliance obligations.
- For a firm on the SEC's registration rolls, that sequence has usually been learned the hard way — a first exam letter, a document request, a scramble.
- Chairman Paul S. Atkins, in the same release, described the transparency as a way to make examinations more effective and to help the agency pursue investor protection, capital formation, and fair, orderly and efficient markets.
The SEC's Division of Examinations has published “The SEC Exam Handbook: A Practical Guide on Process and Engagement,” which the agency says replaces and expands on the division's previous examination brochure by giving registrants more detail about what to expect during an examination. The document covers each stage of an exam, from the risk assessment that opens the process through the disposition letter that closes it, and it adds practical tips and resources for preparing for an exam and staying current on compliance obligations.
For a firm on the SEC's registration rolls, that sequence has usually been learned the hard way — a first exam letter, a document request, a scramble. The division frames the handbook as a roadmap of the process its examiners use across the country and as a means of keeping that process consistent, and it presents the document as consistent with an accessible, collaborative approach to each examination. The director's own account ties the timing to registrant demand: firms asked for clarity about the process, and this is the division's answer.
“By answering the call from registrants to provide more clarity to the exam process, we aim to make the process more consistent and predictable for everyone involved,” said Keith Cassidy, director of the division. Chairman Paul S. Atkins, in the same release, described the transparency as a way to make examinations more effective and to help the agency pursue investor protection, capital formation, and fair, orderly and efficient markets.
Nothing in the release announces a new substantive requirement, and it names no products, sectors or firms the division intends to examine first. Read against the division's standing purposes — improving industry practices and compliance, monitoring risk, preventing fraud — the handbook is a description of how examiners work, not a statement of what they will be looking for. Two features are worth noting for a firm that wants something usable. The release says the handbook gathers the process in one place with several avenues for registrants to give feedback or ask questions, and it says the division made the document public in part to keep practices consistent across offices. An examination, for most advisory firms, is the sharpest contact they will have with the Commission in a given year; exam scope, rather than rule text, is where controls, disclosures and recordkeeping actually get tested. Knowing the order of engagement does not settle what an examiner will ask, but it removes some of the guesswork from the weeks before a first letter arrives.
Feedback channels, not new requirements
The open question the release leaves is what the division does with the feedback it now invites. The handbook's usefulness to a principal depends less on the roadmap, which experienced compliance staff largely know, than on whether the questions registrants send shape the process itself.
Reported by the Regulation desk from SEC Newsroom. Published . Corrections