September 6, 2023 

Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting Documents*

I. Introduction

The SEC-registered investment adviser (“adviser”) population is large and diverse, ranging from 

global asset managers to small firms, engaging in a variety of business activities (e.g., advisory, 

brokerage, and insurance), servicing a diverse client base (e.g., individuals, trusts, investment 

companies, private funds, and pension plans), and managing a wide spectrum of assets under 

management (“AUM”).

1

 Given the size and variety of the adviser population, the Division

utilizes a risk-based approach for both selecting advisers to examine and in determining the 

scope of risk areas to examine. 

The Division’s risk-based approach is dynamic; it adapts to changes in market conditions, 

industry practices, and investor preferences. For example, an adviser may be selected for an 

examination in order for the staff to evaluate risks present at that particular firm, to respond to 

events that pose risks to investors and the markets more broadly, and/or to assess how registrants 

are adapting to new regulatory requirements. The Division leverages technology to collect and 

analyze large sets of industry- and firm-level data to help identify risks and better understand the 

firm’s business during examinations. The Division also reviews disclosure documents and 

various filings with regulators (e.g., Form ADV, including the brochure, and Form PF2).

This Risk Alert provides additional information regarding the Division’s examination selection 

process and includes an attachment with the staff’s typical initial request for documents and

information.

3

 As an examination progresses, the staff often makes additional requests for 

* This Risk Alert represents the views of the staff of the Division of Examinations (the “Division” or “EXAMS”). This Risk 

Alert is not a rule, regulation, or statement of the Securities and Exchange Commission (the “SEC” or the “Commission”). The 

Commission has neither approved nor disapproved the content of this Risk Alert. This Risk Alert, like all staff statements, has 

no legal force or effect; it does not alter or amend applicable law, and it creates no new or additional obligations for any 

person. 

1 There are currently more than 15,000 advisers managing in excess of $115 trillion in aggregate AUM registered with the SEC. 

Advisers that manage at least $100 million in assets are required to register with the SEC, unless they can rely on an 

exemption. Many advisers managing fewer assets are also registered with the SEC, such as advisers that manage SECregistered investment companies and certain advisers that exclusively provide investment advice through an interactive 

website. 

Although the registered adviser population has increased by 13% within the past three years, the staff has continued to 

examine approximately 15% of all (domestic and international) advisers each of these years. 

2 See Form ADV and Form PF. 

3 See also Division, Information for Entities Subject to Examination or Inspection by the Securities & Exchange Commission 

(Examination Brochure) (last updated March 2023) for additional information regarding the examination process. The Division 

conducts examinations to, among other things: (1) promote compliance; (2) prevent fraud; (3) monitor risk; and (4) inform 

policy. The attachment replaces a similar document that was published in 2008, which has been removed from the SEC’s 

website (sec.gov). 
information and documents from the adviser, as needed. Some of the items discussed below may 

be included in supplemental requests, rather than the initial request.

II. Assessing Risks and Scoping Examinations 

A. Selecting Firms to Examine 

Some of the reasons the Division may select an adviser to examine include, but are not limited 

to, one or more of the following: the firm’s risk characteristics (as discussed above); a tip, 

complaint, or referral; or the staff’s interest in a particular compliance risk area. Each year, the 

Division’s publication of its annual priorities provides advisers with insight regarding those areas 

that the Division believes present potential risks to investors and the integrity of the U.S. capital 

markets, including certain products, services, business operations, or practices.

4

 When selecting 

advisers to examine, the Division considers factors such as which advisers provide services, 

recommend products, or otherwise meet criteria relevant to the focus areas described in the 

Division’s priorities. 

There are also firm-specific risk factors that the staff considers when selecting advisers for 

examination, such as those related to a particular adviser’s business activities, conflicts of 

interest, and regulatory history. For example, the staff may consider: (1) prior examination 

observations and conduct, such as when the staff has observed what it believes to be repetitive 

deficient practices during more than one review of a firm, significant fee- and expense-related 

issues, and significant compliance program concerns; (2) supervisory concerns, such as 

disciplinary history of associated individuals or affiliates; (3) tips, complaints, or referrals 

involving the firm; (4) business activities of the firm or its personnel that may create conflicts of 

interest, such as outside business activities and the conflicts associated with advisers dually 

registered as, or affiliated with, brokers; (5) the length of time since the firm’s registration or last 

examination, such as advisers newly registered with the SEC;5 (6) material changes in a firm’s 

leadership or other personnel; (7) indications that the adviser might be vulnerable to financial or 

market stresses; (8) reporting by news and media that may involve or impact the firm; (9) data 

provided by certain third-party data services; (10) the disclosure history of the firm; and (11) 

whether the firm has access to client and investor assets and/or presents certain gatekeeper or 

service provider compliance risks. 

B. Selecting Examination Focus Areas

Once an adviser is selected for examination, additional risk assessment occurs to determine the 

scope of the examination, such as selecting particular areas of the business that examiners will

review. Therefore, the scope of an examination, and consequently the documents requested,6

will vary from examination to examination depending on the firm’s business model, associated 

risks, and the reason for conducting the examination. However, examinations typically include 

4 See, e.g., Division, FY 2023 Examinations Priorities (Feb. 7, 2023). 

5 See Division, Risk Alert: Observations from Examinations of Newly-Registered Advisers (Mar. 27, 2023) (discusses the 

typical focus areas reviewed during examinations of newly-registered advisers and shares staff observations regarding 

compliance policies and procedures, disclosures, and marketing practices. Although the March 2023 Risk Alert is addressed to 

newly-registered advisers, all advisers may find its resources attachment helpful.).

6 Requests for documents relating to background information (e.g., organizational charts) will be made in most examinations.
reviewing advisers’ operations, disclosures, conflicts of interest, and compliance practices with 

respect to certain core areas, including but not limited to, custody and safekeeping of client 

assets, valuation, portfolio management, fees and expenses, and brokerage and best execution. 

During an examination, the staff requests documents and information applicable to these core 

areas to gain an understanding of the adviser’s conflicts of interest and its risks and 

corresponding controls, as well as to test the effectiveness of the adviser’s compliance policies 

and procedures for monitoring, mitigating, and managing such risks and conflicts of interest. 

III. Selecting Documents to Request – Typical Information Requested

As part of the examination process, the staff usually sends an adviser a letter notifying the firm 

of the upcoming examination, which contains an initial request list identifying certain 

information, including documents that the staff will review as part of the examination.7 The 

initial request for information typically includes: (1) general information, which provides the 

staff with an understanding of the adviser’s business and investment activities; (2) information 

about the compliance risks that the adviser has identified and the written policies and procedures 

the firm has adopted and implemented to address each of those risks; (3) information to facilitate 

testing with respect to advisory trading activities; and (4) information for the staff to perform its 

own testing for compliance in various areas. 

To assist advisers further, the Division is providing the Typical Initial Information Examiners 

Request of Investment Advisers as a resource attachment to this Risk Alert.

IV. Conclusion 

The Division is providing this information so that advisers may prepare themselves for an 

examination. Although the Division continuously refines and enhances its risk assessment 

process, the information shared herein also may assist firms in their compliance efforts. 

7 Examinations may be conducted on an announced or unannounced basis. When the examination is unannounced, the staff 

may provide the entity with a request for information, including documents, upon arrival.

This Risk Alert is intended to highlight for firms risks and issues that Division staff has identified. In 

addition, this Risk Alert describes risks that firms may consider to (1) assess their supervisory, 

compliance, and/or other risk management systems related to these risks, and (2) make any changes, 

as may be appropriate, to address or strengthen such systems. Other risks besides those described 

in this Risk Alert may be appropriate to consider, and some issues discussed in this Risk Alert may 

not be relevant to a particular firm’s business. The adequacy of supervisory, compliance and other 

risk management systems can be determined only with reference to the profile of each specific firm 

and other facts and circumstances. 
Attachment: Typical Initial Information Examiners Request of Investment Advisers

Described below are the types of initial information, including documents, that staff may request and review 

during a typical examination of an adviser that does not engage in additional activities and/or have additional 

relationships (e.g., manage private funds). These information requests are generally transmitted through secure 

email, and responses are also typically provided electronically. If certain records are not maintained 

electronically or cannot be produced electronically, the staff may request that the adviser make such records 

available for in-person examination.

General Information

Organizational 

Information

• Organizational structure, affiliations, and control persons.

• Remote offices and branch locations. 

• Joint ventures or other businesses (including those with respect to the firm or any officer, 

director, portfolio manager, or trader).

• Current and former supervised persons, officers, and/or directors. 

Business and 

Operations 

• Committees (e.g., responsibilities, members, meeting frequency, meeting minutes). 

• Client advisory contracts or agreements. 

• Agreements and arrangements with third parties associated with the management of client 

accounts (e.g., sub-advisers, third-party managers, referrals, wrap fee programs, and thirdparty investment platforms used for clients). 

• Fees and payments for services rendered.

• Power of attorney obtained from clients.

• Service providers and the services they perform. 

Disclosures 

and Filings 

• Disclosure documents and filings with regulators (e.g., Form ADV, including the brochure, 

and Form CRS). 

Legal and 

Disciplinary 

• Threatened, pending and settled litigation, arbitration, or Administrative Proceeding 

involving the adviser or any supervised person. 

• Remedial actions taken against supervised persons. 

Information Regarding the Compliance Program, Risk Management, and Internal Controls

Compliance 

Program and 

Oversight 

Process

• Compliance policies and procedures in effect during the examination period.

• Tests performed (i.e., compliance reviews, quality control analyses, surveillance, and/or 

forensic or transactional tests performed by the firm). 

• Compliance consultant reports resulting from a review of compliance policies and 

procedures, operations, or books and records. 

• Annual and/or interim reviews of policies and procedures, including any reports prepared. 

• Record of compliance exceptions. 

• Remote office and/or independent advisory contractor oversight process. 

• Client complaints and correspondence and the process for monitoring such 

communications, including electronic communication. 
Compliance 

Program and 

Oversight 

Process (cont.) 

• Inventory of compliance risks and conflicts of interest that forms the basis for policies and 

procedures and notations regarding changes made to the inventory. 

• Written guidance and training provided to employees regarding compliance program and 

documentation of attendance. 

Valuation 

• Valuation process.

• Pricing services, quotation services, and externally acquired portfolio accounting systems 

used in the valuation process and payment information. 

• Fair-valued and illiquid securities held by clients. 

• Advisory fee calculations. 

• Pricing overrides. 

Information 

Processing, 

Reporting, and 

Protection

• Safeguards for the protection of customer records and information.

• Electronic access controls. 

• Business continuity plan. 

• Cybersecurity incidents or breaches (e.g., incident description, impact, and remediation). 

Information to Facilitate Testing with Respect to Advisory Trading Activities 

Information 

About 

Advisory 

Clients and 

Accounts

• Current advisory client account information regarding: account inception, type, balance, 

and management discretion; client demographic information; client affiliation with the firm; 

custodial arrangements; firm authority with respect to the account (e.g., trading authority, 

custody, and trustee); services provided; investment strategy and investment objectives; 

portfolio manager; fee computation; fee payment arrangements; and consultant related to 

obtaining the client, if any. 

• Advisory clients lost during review period. 

Portfolio 

Management

• Securities held in all client portfolios, including information identifying each client holding 

an interest, the amount owned by each client, the aggregate number of shares or principal 

and/or notional amount held and total market value of the position. 

• Information about certain types of client investments (e.g., private investments and initial 

public offerings). 

• Publicly traded companies for which employees of the adviser or its affiliates serve as 

officers and/or directors.

• Companies for which employees of the adviser or its affiliates serve on creditors' 

committees.

• Outside compensation to supervised persons including compensation related to client’s 

transactions or investments.

• Client portfolio profile information (e.g., investment objectives, investment strategy, risk 

tolerance, suitability, and mandates). 
Brokerage and

Trading 

• Trade blotter.

• Brokerage arrangements and best execution evaluation documentation. 

• Soft dollar budget and products and services obtained using clients' brokerage 

commissions.

• Commission-sharing arrangements. 

• Affiliated broker-dealers.

• Principal trades and cross transactions.

• Wrap fee programs.

• Trade errors and related information. 

• Trade allocation information regarding initial public offerings and secondary offerings in 

which clients, proprietary accounts or access persons participated. 

Conflicts of 

Interest and

Insider 

Trading

• Code of Ethics and insider trading policies and procedures for the firm and its affiliates.

• Code of Ethics attestations.

• Exemptions from Code of Ethics for supervised persons. 

• Reports of securities transactions reported by access persons. 

• Fee splitting or revenue sharing arrangements. 

Information to Perform Testing for Compliance in Various Areas 

Marketing and 

Advertising 

• Advertisements and marketing materials disseminated, including newsletters, public audio 

and video programs, pitch books, pamphlets, brochures, websites, blogs, social media, and 

other promotional and/or marketing materials used. 

• Client or investor meeting materials and presentations.

• Sponsored and attended seminars or events. 

• Client performance information. 

• Composite performance information, including current and terminated composites and 

composite returns. 

• Requests for proposal, due diligence questionnaires, and any other questionnaire (e.g., third 

party consultant database or other performance database).

• Testimonials and endorsements, including payments made and compensation received. 

• Third-party ratings and rankings. 

Financial 

Records

• Balance sheet, trial balance, income statement, and cash flow statements.

• Cash receipts and disbursements journal. 

• General ledger and chart of accounts.

• Loans and sales of firm or affiliate's stock.
Custody

• Custodian identification and contact information for entities that maintain custody of client 

assets.

• Surprise examination documentation, such as engagement letters, client account lists, and 

reports, results, and recommendations. 

• Auditor engagement letters, opinions, and findings.

• Custodial confirmation of positions for specific clients.