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5 tips to strip stress out of your next SEC, FINRA or state regulatory audit


Understand the why

In addition to making sure your firm can properly accommodate regulators, Integrated Financial Partners’ Chief Legal Officer John Cataldo said the initial communication is a great opportunity to figure out exactly why you’re getting a digital or IRL visit.

“If we’re talking about something that’s either targeted, limited scope or broad scope, the firm should really be trying to understand the purpose and what is bringing them in,” he said. “Is this a routine, unspecified visit? Is this something that’s related to an industry sweep? Or is this something related to the discovery of a red flag.”

With those answers in hand, use the provided resources from the regulators themselves to study up. Doing so can cut down on uncertainty and give time back to your team.

“There is plenty of guidance out there. There are FINRA, SEC and state exam priority letters. There’s regulatory actions. There’s FINRA notices to members and SEC risk alerts. There is state and multi-state NASAA guidance that is published on a routine basis,” Cataldo said. “You really have to understand your business, and you have to understand the regulator’s priorities to be prepared for an audit. And then take it a step further when they come in … you need to be prepared to ask them right from the outset when you get your exam letter or your exam call what the scope is.”

Vinsohaler also warned against turning to the numerous blog posts or opinion pieces that often follow alerts or communication from regulators.

Cut out the middleman, and go right to the source.

“They’re not going to give you a lot of commentary and a lot of color, but they give some and you can have that straight from the SEC or the state,” he said. “To me, that’s the best way to be prepared for these.”


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.