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Monday, March 30 2020

Making the Cut: Factors for Registrant Examination

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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