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Industry Spotlight > RIAs

When the Regulators Come Knocking

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I’ve spoken with many advisors over the years. Some owned their own one-man advisory shop and others worked for a smaller firm. Whenever the subject of an audit came up, many said they hadn’t been audited in years, and some even said they’d never been audited. Well, as luck would have it, I’ve drawn the short straw. I’ve received notification of an audit.

Years earlier, when I was the principal at another firm, I was responsible for this process. We were audited and the regulators came in, reviewed the necessary material, and left. Then, about two weeks later, I received a letter with the items that needed to be addressed. They call this a deficiency letter. We were given 30 days to make the necessary corrections. Now I will go through this process as a business owner. In the notification we received, there was a list of the items they are requesting to see. Items such as parts I and II of our most recent ADV, our policies and procedures related to operations, our balance sheet, and our privacy policy, just to name a few. As I look through the list, some of the items are readily available and some will require preparation.

The bottom line is this. I view this as an opportunity to learn more about what I need to be doing. It’s been my experience that the regulators are not out to get you. I think of them as experts at what they do, and for me, it’s like a free consultation. I get to learn about the things that are important from a legal and regulatory standpoint. Since my business is relatively new there shouldn’t be a tremendous amount of information to address.

I’ll let you know how it comes out.


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