With the SEC’s presence exam initiative for new registrants and the Never-before-examined initiative for existing registrants, the odds have never been greater that the SEC will knock on your door and start an examination. I’ve also heard from a friend that the SEC is coming in for a full blown examination of her firm. (I also heard an SEC examiner mention that they are going to try to ferret out private fund managers who did not register.)
Obey the Boy Scout Motto and be prepared.
Prepare an introductory presentation. As I discussed last week, start drafting that presentation now, before the SEC knocks on the door. Circulate it broadly to get comments. Review it each quarter to keep it up-to-date. You are not going to have enough time to create presentation once you get SEC’s knock on your door.
Practice getting the documents ready for an exam. Grab a recent SEC document request list and give yourself a week to get all of the documents assembled. You may find it hard to answer some of the questions, so you can change your record-keeping process to address a likely question. You will also have a stockpile of documents ready to go when the SEC shows up.
Prepare some key employees. Look at your organization and figure out who the SEC examiners are likely to ask to speak with. They will want senior people in key risk areas. Valuation will be a big area for most real estate funds and private equity funds. Grill your valuation person so he or she is able to give a thoughtful presentation on your firms valuation process. Figure out who will do will being grilled by the SEC examiners and who will do poorly. Better to have that information now than in the crush of an SEC examination.
Prepare an examination procedure. Layout who gets notified and who is responsible for the various aspects of the examination. Think about where you want the examiners to sit while they are on site. Think about how you want to prepare and deliver documents.
References:
- Create an Introduction for the SEC
- SEC document request list examples compiled by Compliance Building
