Strategies for Successfully Managing an SEC Audit

Advances in technology and the adoption of a data-centric approach have made it fast and easy for the SEC to comprehensively audit even the smallest firm, regardless of its location. 

The SEC’s 2021 Examination Priorities report states that it will continue to conduct examinations of RIAs that have never been examined, including new RIAs, with a particular focus on firms’ compliance programs.

To promote a culture of compliance within financial services, the Division is expanding its coverage by:

  • Driving program efficiencies through process and technology.
  • Realigning internal staffing to address the coverage rates for RIAs.
  • Increasing training and onboarding of experienced subject matter experts.

The Division’s efforts are paying off. In 2020, it completed 2,952 examinations and audited 15 percent of RIAs, up from 10 percent in 2014.

Essentially, the SEC has transitioned from a limited, labor intensive, data-sampling approach to one that is more comprehensive and automated. 

Successfully Navigating an Audit

Firms using the Envestnet unified wealth management platform may have an easier time navigating an audit because they may be able to pull data more quickly and easily than a firm that has to manually piece together data from multiple reports and providers, a resource-intensive process. 

Firms that provide auditors with clean data sets are able to eliminate a lot of time-consuming back and forth with the SEC, whose follow-up questions can seem endless when data is incomplete or inconsistent. 

“To survive an audit, which can disrupt a business, advisors have to know where their data is and how to get it quickly,” says Scott Sheffer, CEO at Carnegie Wealth. “Here’s where wealth management technology supported by a team of qualified consultants pays dividends. With the right platform and support, no matter how deep into the weeds the auditors want to go, advisors can balance the demands of the audit with running the firm and serving clients.”

Helping a Small to Mid-Size Firm Satisfy Auditors

In the middle of 2020, the SEC contacted one of our clients, a small firm with three employees serving 50 clients across 125 accounts and $105 million in AUM. The firm utilizes the Envestnet platform for portfolio accounting. The audit started with an initial phone interview followed by multiple rounds of follow-up questions.

During the period when the SEC was going back and forth with the firm multiple times per week, our client was able to rely on LibertyFi to quickly respond to inquiries passed along from the auditors, often receiving responses from our team within minutes and at the latest by the end of the day. 

Our expertise and ability to quickly locate and export data in the format the SEC requires saved our client valuable time so that they could focus on serving their clients. An undertaking that could have overwhelmed our client was simplified because we offer the resources and expertise they needed to confidently and efficiently get through their first audit.

Preparing Now

To minimize the pain and disruption of an audit by the SEC, recently formed RIAs and those that have not been examined for some time should prepare now. An important key to successfully navigating an audit is the ability to access clean data from a single source. Firms that are well-positioned with their data will be able to confidently handle audits and compliance questions when they pop up, one less thing they will have to worry about in 2022.

To learn how LibertyFi can help your firm prepare for an audit, visit

Thomas Reid, Senior Consultant, LibertyFi


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