SEC Exam Focus Updates 2020

We have had several clients who have had SEC exams recently despite the social distancing measures in place across the United States.  Yes, they were remote exams. The SEC is used to working from home and some examiners haven’t skipped a beat.   Many of the examiners we know personally have children at home and are also juggling homeschooling so needless to say, we are impressed by the SEC activity we have seen the past month.

Our clients have received several inquiries specific to the Covid 19 pandemic risk and business continuity preparedness.  The exams have included established SEC registered entities and newly registered ones.

The pandemic risk related questions range in scope, but include for example, the use of personal devices for business and the firms’ responses to the pandemic.

Some of these questions are likely the SEC establishing baseline data points, seeking to understand the layers of risk presented by Covid 19 and social distancing.  We don’t know if we will see a related SEC alert on pandemics at some point, but It’s likely given the pandemic raises broader disaster recovery and business continuity risks.  In the meantime, we suggest you consider documenting responses to the questions below as part of your compliance program.  Feel free to reach out to us with questions.

BCP

  • When did you implement your BCP?
  • Have any parts of operations not worked within the BCP?
  • How many of your staff have been working remotely?
  • Have you identified any weaknesses in your BCP?
  • What oversight have you undertaken regarding your 3rd party service providers?
    • i.e. Assessing the resiliency of your service providers BCP
  • Are you prepared to work remotely for an extended period of time?

Travel

  • Is your staff doing any traveling?
  • Has the firm set any policies regarding business travel?

Succession Plan

  • What happens if your key employees become incapacitated?

Impact on Investment Strategy

  • Has your strategy changed?
  • Has the firm taken any opportunistic trading as a result of the market volatility?
  • Have you adjusted market exposure?
  • If invested in money market funds, what specific funds are you invested in?
  • If lowered exposure, when do you believe you will start increasing exposure?

Wire Authorization

  • Have you reviewed your controls?
  • Any changes?
  • What if someone is incapacitated?

Assessment on Business

  • Have you assessed the impact of COVID-19 on your business?  If not yet, do plan on doing so at some point?

Other Challenges

  • Finally, are you aware of any other challenges of COVID-19 including something you may have heard at another firm?