Navigating An Audit From The SEC

More Registered Investment Advisor (RIA) firms are being audited than ever before.

The regulatory environment for Registered Investment Advisers (RIAs) has entered a new era of intensity. In late 2025, the SEC’s Division of Examinations confirmed that the trend of increased oversight is not slowing down. The percentage of RIAs examined by regulators has climbed steadily from 16% in 2021 to nearly 20% in 2026. This surge is fueled by a relentless focus on Regulation Best Interest (Reg BI), the finalized Cybersecurity Risk Management

For today's RIA, an audit is no longer a "once-in-a-career" event. While historical averages once suggested audits occurred every 13 years, the SEC has significantly compressed this timeline. Firms with high-risk factors—such as those utilizing Artificial Intelligence (AI) for investment decisions or managing private credit—can now expect exams as frequently as every 5 to 7 years. Furthermore, newly registered firms are being prioritized; if you launched your RIA recently, expect a "welcome" exam within your first 12 to 18 months.

Because modern audits are often data-driven and "risk-based," they can be initiated with very little notice. Preparation must be a constant state, not a last-minute scramble. Our compliance specialists recommend these three steps:

1. Organize and "Tech-Enable" Your Records

The SEC now expects digital readiness. Your organizational chart, employee trade records, and client agreements must be meticulously organized and instantly accessible.

• Today's Focus: In addition to the basics, the SEC’s latest priorities emphasize AI Governance and Emerging Tech. You must be able to produce documentation explaining how your firm supervises automated tools and how you protect data under the new Reg S-P incident response requirements.
• Marketing Scrutiny: With the Marketing Rule now years into its enforcement, examiners are strictly auditing extracted performance, model fees, and third-party testimonials.

2. Prepare for the "Hybrid" Interview

While the pandemic introduced virtual audits, we're now seeing a return to onsite, full-scope inspections, often combined with remote data pulls.

• The Strategy: Senior management and CCOs must have a unified internal strategy. Practice your firm’s "overview" to ensure it is concise and aligns with your Form ADV.
• The Exit Interview: Never skip this. Once the field work is done, request an exit interview to identify potential deficiencies early. This allows you to begin remediation before the formal letter even hits your desk.

3. Proactive Response to Deficiency Letters

After the audit, expect a Deficiency Letter within 90 to 180 days. This document outlines the SEC’s concerns and sets a hard deadline for your response.

• The 30-Day Rule: Regardless of the complexity of the findings, RIAs typically have only 30 days to reply.
• The "Correction" Mindset: A deficiency isn't a death sentence—it’s a roadmap. Most findings involve technical gaps in policies or record-keeping that can be corrected with the right expertise.