7 Things to Do Before an SEC Audit
Once you receive notification of a regulatory examination, stay calm and follow these seven steps. (Page through to see all the steps, or click here to see them in a single page.) -- Brian Hamburger & Gary D. Davis
Brian Hamburger is president and CEO and Gary D. Davis is program director at MarketCounsel, a compliance consulting firm based in Englewood, N.J.
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1. Notify all your staff.
Also, remind your staff that being examined does not mean you did anything wrong. You work in a regulated industry and will be routinely examined.
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2. Notify essential service providers.
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3. Notify your compliance resource.
Then schedule a call with your compliance resource to review the initial request letter for clarity around the data the SEC is requesting and for advice on conducting verbal interviews.
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4. Gather initial data requested.
Note that the SEC prefers to work with electronic books and records, so the more you have available electronically, the more efficient your data-gathering process will be.
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5. Conduct an internal review of the requested data before it is submitted to the regulator.
We recommend two actions here. First, have a review process where two individuals review the data before submission -- with one person generating the data, and the other reviewing the data for accuracy against the initial request.
Additionally, ensure you maintain an electronic version of all data provided to the regulator.
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6. Hold a staff preparation meeting.
First: The chief compliance officer is managing the examination. All requests go to the CCO and all interviews must include the CCO.
Second: Remember there is nothing to fear, and that this is just a part of working in a regulated industry.
Third: Answer only the questions asked by the regulators; do not freely give up more information than requested (either orally or in writing).
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7. Be courteous and controlled.
You will lose control, however, by providing more than is asked, providing inaccurate or erroneous information -- or by being unable to prove your high culture of compliance, systems and controls, supervision and policies and procedures.
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