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Financial Services Law Insights and Observations

SEC’s Division of Examinations provides guidance on broker-dealer examination process

Securities Broker-Dealer Securities Exchange Commission Examination Supervision


On June 5, the SEC’s Division of Examinations issued a risk alert to help broker-dealers prepare for an examination by the Division. The alert highlighted: (1) information that may be considered when selecting firms to examine; (2) areas of focus for the examination; and (3) types of information and documents that may form part of an initial exam request. The alert noted various reasons why the Division staff may consider firms for examination, including:

  1. A firm’s examination history
  2. Supervisory and disciplinary concerns
  3. Tips or complaints on the firm
  4. The length of time since the firm’s last examination
  5. Customer base of the firm
  6. Products and services offered by the firm
  7. Any signals of financial stress the firm may experience
  8. New reports on the firm
  9. Filings by the firm with the SEC
  10. If the firm holds cash or securities

The alert also included a sample request list of information and documents that Division staff would request. Although the list was not necessarily meant to be exhaustive, the sample request list was grouped into the following categories:

  • General Information: Organizational Information; Business and Operations: Financial Information; Legal and Disciplinary.
  • Supervisory and Compliance Structure: Books and Records, and Compliance and Oversight Processes; Branch Office Oversight; Information Processing, Reporting, and Protection.
  • Regulatory Requirements (Select Topics): Sales Practices, Regulation Best Interest, and Form CRS; Anti-Money Laundering; Net Capital and Customer Protection