Numerous factors are taken into consideration when the SEC’s Office of Compliance Inspections and Examinations (OCIE) compiles its annual list of registrants to audit. In a recent conference call conducted by the SEC’s Fort Worth Regional Office, some insight into this process was covered. While this information doesn’t keep you from an examination, it may provide you some guidance into why you “made the cut.”
The Role of ORAS
The Office of Risk Assessment and Surveillance (ORAS) plays a central role in determining registrants to examine. They generally provide the initial list of registrants to the OCIE regional offices, who then pare down the list to roughly 150 – 170 firms per year.
What Are the Potential Triggers?
ORAS and the OCIE sift through various parameters when paring down the list. Filling multiple “buckets” keeps you towards the top of the list. Some of the categories for consideration include, but are not limited to:
- ADV/U4/U5 filings
- Historical findings
- Inherent risk profile
- Workforce disciplinary history
- Operational changes in accounts or assets
- Firms with the same Chief Compliance Officer
In most cases, firms will appear on the initial list if
- They are a new registrant
- Two plus years and never audited
- Ten plus since the last audit
- Another agency has referred
- There have been tips, complaints, etc. filed against an individual or the firm.
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About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.