Broker-Dealers Take Note: Here's What Triggers an SEC Exam

The Securities and Exchange Commission warned broker-dealers Wednesday in a new Risk Alert that prior disciplinary history as well as signs of financial stress and reports in the media could make them prime targets for an exam.

The alert, according to the agency, is designed to help broker-dealers prep for a possible exam by citing information the Examination Division may consider when selecting firms to examine as well as areas of focus for the exam.

The alert also provides the types of information, including documents, that exam staff “may initially request” during a broker-dealer exam and includes a Sample Initial Information Request List.

When selecting broker-dealers as potential examination candidates, exam staff state that they may also consider prior exam history; tips, complaints or referrals involving the firm; the length of time since the firm’s last exam; as well as the firm’s customer base, products and services.

A specific office or branch of a broker-dealer may also be selected, the alert warns, “based on the risk factors identified with that location (e.g., customer complaints or outside business activities of personnel working from that location).”