How understanding SEC examinations can inform the due diligence process

The rationale used by the SEC in its examination process cover many of the same types of issues that investors pursue during the due diligence process, but typically in much greater depth and over a longer period of time. However, the results of SEC examinations, of a given manager, are not part of the public record. How can you as an investor, leverage knowledge about SEC examinations to further your own initial and ongoing due diligence? Understanding the examination process, current focus areas and the typical outcomes of examinations can help focus your due diligence efforts to key risk areas and make your due diligence processes more effective.

Learning Objectives

  • What is the SEC’s objective? Review of the current SEC focus areas.
  • Understanding the SEC the various types of examination process.
  • Responses and results, reviewing the output of SEC examinations.

Keep in mind that an SEC examination is not a pass fail endeavor endured by the managers you invest through, rather it is another key component in oversight designed to uncover conflicts of interest in order to ensure that they are adequately disclosed and mitigated in order to protect investors and the markets. A thorough understanding of the SEC examination process can assist your due diligence teams in knowing where to focus their time and attention.


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