SEC mock exams

Meeting the challenges of a regulatory examination

The SEC examines about one-sixth of all registered investment advisers each year. Regulatory examinations are driven by various factors, such as emerging risks and trends, and responses to tips, complaints and referrals.

The SEC’s Division of Examinations routinely audits advisers who are newly registered, have never been examined, or have not had a recent examination. An examination involves a deep and thorough review of an adviser’s operations, compliance arrangements and recordkeeping, so it’s advisable to be prepared for a visit.

An SEC exam puts your investment and operational processes under intense scrutiny. Would you be ready for one?

Bovill Newgate’s SEC mock exam prepares you for the real thing

Deficiencies in a regulatory exam can negatively impact operational due diligence (ODD) reviews, and may result in reputational damage and/or a fine. Mock exams help identify areas of weakness for advisers ahead of an SEC examination. The goal of a mock exam is to minimize – or ideally eliminate – the number and severity of potential violations. Mock exams also provide essential practice for effective and efficient interactions with the SEC. This includes locating and producing documentation, delivering information in the requisite format and polishing the interview skills of key individuals.

Are you in scope for an incoming examination?

The SEC conduct two major types of exam:

New Registrant Exam – Focused on firms that have recently registered with the SEC, these exams focus on the quality and efficacy of the firm's compliance program.

Full Scope Exam – Established firms will undergo regular routine examinations with a broader and more comprehensive evaluation, examining a wide range of operations and controls.

Neither should be taken lightly, as deficiencies can put your firm under additional scrutiny from the regulator.

Our approach to SEC mock exams

Led by a former SEC examiner, Bovill Newgate’s mock exams are designed to specifically prepare investment advisers to better understand the SEC’s processes and priorities, and prepare your staff for the type of interviews conducted by the SEC. Whether you’re preparing for a new registrant or full scope examination, we can help you prepare. Our mock exam program evaluates both the investment and operational aspects of your firm, including controls and adherence to compliance policies and procedures.

We tailor the scope of the mock exam to your business and proactively work to ensure the mock exam meets your objectives. Mock exams can be broadly focused or targeted – just like a real SEC exam.

What you can expect

The diagram below illustrates the typical timeline for a full scope mock exam. Timelines can be adjusted based on the scope, needs and size of the adviser:

• Firm review

  Prior to beginning any mock exam, we review publicly available information and documents to define the scope of the examination. The scope is driven by four areas: SEC exam priorities, recent SEC risk alerts, previous regulatory examinations and the type of adviser.

• Initial document request

  We issue an Examination Letter that includes a detailed document request list. Bovill Newgate, like the SEC, tailors its requests based on the risks applicable to your firm. Requested documents usually focus on the following areas:

  • General organizational and supervisory structure
  • Compliance program and arrangements
  • Portfolio management
  • Trading and brokerage arrangements
  • Performance advertising and marketing
  • Financial records
  • Private funds

• Document preparation

  Once you receive the document request list, you’re responsible for producing documents by the stated deadline. The SEC often has aggressive deadlines for document production. A major part of the examination is testing the firm’s ability to produce records under tight timeframes. The document preparation process underscores the importance of a sound document retention policy

• Document review

  We spend 2-4 weeks reviewing the documents provided to become more familiar with the details of your business. During the document review, we’ll develop and define topics to observe and discuss during the onsite portion of the mock exam.

• Onsite work: interviews and follow-up requests

  The onsite portion of the review is designed for us to gain further insight into how your firm operates on a day-to-day basis. We do this through observation of and interaction with the firm’s key personnel and other employees. We interview select staff to identify risks, conflicts of interest and inconsistencies, as well as to assess preparedness to speak with regulatory authorities. The onsite portion of the review also provides you the opportunity to work through the logistics of a real exam.

• Examination report preparation

  At the end of the mock exam, we provide a detailed findings report that addresses deficiencies.

  This report will Include a summary of the relevant regulations and details regarding the deficiency. The exam team will discuss deficiency findings and steps to address deficiencies as well as provide feedback on staff interviews. The final report will reflect your response to the deficiencies and plans to mitigate any findings.

• Debrief

  The debrief is a time to discuss the mock exam results. We’ll share an assessment of your execution of mock exam processes. The exam team will discuss deficiency findings and steps to rectify deficiencies as well as provide feedback on staff interviews.

Start your journey

Get in touch using the the form below and a member of the team will get back you as soon as possible.