Who answers to the SEC, and how
Public companies carry ongoing reporting duties, including annual and quarterly reports and current reports when significant events occur, along with rules on insider trading, selective disclosure, and internal controls. Investment advisers registered with the SEC must maintain a compliance program, designate a chief compliance officer, and keep books and records that examiners can review; smaller advisers often register with states instead. Private companies raising money usually rely on an exemption from registration and still face filing obligations and limits on how they can approach investors. Broker-dealers are overseen by both the SEC and FINRA.
Where compliance programs break down
Problems often come from gaps between written policies and actual practice: a code of ethics that is not enforced, marketing material that does not match performance records, or trading windows that executives ignore. Off-channel communications, where employees conduct business over personal text messaging, have drawn significant enforcement attention at regulated firms in recent years. Disclosures that were accurate when made can become misleading if they are not updated. Keep compliance records complete and current, because an examination or inquiry will ask for them first. Periodic reviews of the program, documented in writing, help show that it is more than a binder on a shelf.
Examinations and reviews
The SEC brings civil enforcement actions, while criminal securities cases are prosecuted by the Department of Justice, and an examination or a comment letter is not the same as an investigation. Even so, responses to examiners and SEC staff should be accurate and reviewed by counsel before they go out. We review your existing policies against how the business actually operates, help prepare for examinations, and respond to deficiency letters and comment letters. At the outset we want to understand your registration status, recent changes in the business, and any issues already raised by regulators or auditors. If an examination turns into an inquiry from the enforcement staff, preservation duties and the approach to testimony change.
