The SEC's Division of Examinations has published an Exam Handbook, a plain-English walkthrough of the examination process from candidate selection to closing. See SEC Division of Examinations, The SEC Exam Handbook: A Practical Guide on Process and Engagement, SEC 2389 (09-26) (the "Handbook"). It carries the same form number as the Division's old exam brochure, dated one year earlier, and reads as that document's expanded successor. Compare id. with SEC 2389 (09-25) (exam brochure).
Much of the Handbook confirms what practitioners already knew. But several details deserve attention, either because they are stated more plainly than before or because they answer questions firms actually ask.
No recordings, and no AI notetakers
The staff does not record or transcribe exam meetings, and instructs participants not to do so either. See Handbook at 8 (staff "does not consent to the use of recording, transcription, artificial intelligence notetaking tools, or other similar technologies"). For firms whose default meeting setup now includes an AI notetaking tool, this is a detail to catch before the first interview, not during it. Disable the tools for exam meetings, and brief every participant, because the notetaker that joins automatically is still a notetaker.
Three clocks to calendar
The Handbook states the timeline commitments in one place. The disposition letter arrives within 180 days of the later of the end of on-site work or the staff's receipt of all requested records, a deadline set by statute, with a possible additional 180-day extension for certain complex exams. See Handbook at 9 (citing 15 U.S.C. § 78d-5(b)). A registrant responding to a deficiency letter has 30 days. See id. at 10. Staff comments on that response, if any, come within 60 days. See id. at 11. Separately, the Handbook notes the Commission's expectation that records be available to staff within 24 hours in most circumstances, though the staff usually allows two weeks for the initial production. See id. at 5.
You will know who is in the room
Staff from other SEC divisions and offices may participate in examinations, and the Handbook commits to disclosure: "We will notify you when such participation occurs." See id. at 6. That notice matters. The presence of policy-division staff may signal an interpretive question; other participation may signal something else. Either way, firms should ask who is participating and calibrate accordingly.
Candor about outcomes
The Handbook is unusually direct about how exams end: "Most examinations conclude with such a letter," referring to deficiency letters. See id. at 10. It is equally direct that a deficiency letter is not a grade, does not describe best practices, and that staff silence on an activity is not a blessing. See id. (noting the absence of comment "should not be interpreted as concurrence"). Selection for an exam, the Handbook also notes, is not itself a signal that something is wrong, and the reason for a particular examination is non-public. See id. at 4.
The tone, and what to make of it
The Handbook describes an examination approach that is collaborative rather than adversarial, and it includes a two-column table of what registrants can expect from the staff and what the staff expects in return. See id. at 1, 14. That framing is welcome, and in my experience most exam teams live up to it. It coexists, however, with the Handbook's own reminders: referrals to the Division of Enforcement can happen without an exit conference when circumstances are exigent, and no disposition letter forecloses Commission action. See id. at 10. Cooperative process and careful preparation are not alternatives. A firm should bring both.
The Handbook, by its own terms, is a staff statement with no legal force. See id. at 15. It is also the clearest statement in years of how the Division understands its own process, and worth an hour of any CCO's time.
Source: SEC Division of Examinations, The SEC Exam Handbook, https://www.sec.gov/files/exam-handbook.pdf.
Originally published on LinkedIn.