Inside the SEC Exam Room: What CCG is Seeing
Chenery Compliance Group regularly supports registered investment advisers, registered investment companies, and private fund managers during SEC examinations. Because we are involved in examinations across multiple firms, we are able to observe developingthemes that may not be visible from a single firm’s experience.
The observations below reflect recent examinations in which we have participated. They are not intended to be comprehensive, and examination focus areas can change. Even so, these themes may be useful as firms refresh risk assessments, update testing plans, and identify areas where policies, procedures, documentation, or oversight may need attention.
Fiduciary obligations remain central.
Examiners will closely review a firm’s operations, investment and compensation practices to ensure the best interests of the investing public are being served. Firms should remain attentive to conflicts of interest, fee and expense practices, allocations, valuation, disclosures, and whether policies and actual practices align. Conflicts should be clearly disclosed or mitigated.
Marketing Rule compliance, particularly performance advertising, remains a significant focus.
Examination requests have continued to probe compliance with the Marketing Rule, especially where advertisements include performance information. Hypothetical performance will draw close scrutiny, including questions around assumptions, testing, validation, intended audience, disclosures, and supporting records. Firms should ensure that marketing procedures address performance advertising and that someone with appropriate expertise reviews and substantiates the results presented before use.
Artificial intelligence and digital asset topics are being raised inconsistently.
Firms should be prepared for examiners asking about the firm’s utilization of AI throughout the business and the controls established to manage the associated risks. Even where crypto or digital assets are not the primary focus of an exam, we have seen related requests in some examinations. Firms with exposure to, advice regarding, or business activities involving digital assets should ensure that their compliance manuals, risk assessments, disclosures, and supervisory processes address those activities specifically.
Electronic communications have received less emphasis in some recent exams.
Although electronic communications and off-channel messaging were prominent enforcement themes in prior years, our recent exam experience suggests they have not been the primary focus in every current exam. Firms should not interpret this as a reason to reduce oversight; electronic communications policies, reviews, training, and recordkeeping remain important components of a defensible compliance program.
Firms should be prepared for short turn-around times, extended timelines and intermittent follow-up.
In examinations we’ve seen reasonable turn-around times for document requests (ex. 2-3 weeks), but we’ve also seen exams with very short turn-around requests of one week or less. In several examinations, staff have taken significant time between document requests, and follow-up requests may arrive months after the initial production. Firms should maintain an organized exam response file, continue preserving relevant records, and avoid assuming an exam is complete until the staff issues a deficiency letter, closure communication, or other clear notice.
On-site examination activity has returned.
After several years in which examinations were often conducted virtually, firms should be prepared for examiners to be on-site for at least part of the exam. This means ensuring appropriate personnel are available, workspaces and systems access are coordinated, and employees understand how to interact professionally with examination staff.
Examination staff may be receptive to reasonable alternatives for burdensome requests.
If a request is impractical as written, firms should consider raising the issue professionally and proposing a practical alternative. For example, if staff requests every marketing piece from a lengthy exam period and the volume is significant, a firm might offer a complete inventory and propose that staff select a sample for production. Staff may still require the full production, but a thoughtful alternative can reduce burden while maintaining cooperation and transparency.
Recent SEC examinations reinforce the importance of a risk-based compliance program that is current, documented, and tested. Even when specific focus areas shift, firms are best positioned when they can demonstrate that their policies address the business they actually conduct, that testing is meaningful, and that decisions are supported by the firms books and records. Firms that have not been examined recently should use these observations as a prompt to revisit high-risk areas, confirm that documentation is exam-ready, and address gaps before receiving an SEC request. Chenery Compliance Group is here to help. If you would like to schedule time to meet with one of our senior compliance professionals, please contact us here.