The Handbook provides a process roadmap for SEC registrants undergoing an examination and describes each examination stage from candidate selection through the completion of an examination.
The Handbook clarifies expectations of the Division’s staff (the “Staff”) with respect to registrants, and sets out what registrants can expect from the Staff in connection with an examination. By its terms, the Handbook represents the views of the Staff and is not a rule, regulation, or statement of the SEC that has legal force or creates new or additional obligations for market participants.
However, a deep understanding of the Handbook will be invaluable for any registrant undergoing an examination. This Client Alert summarizes the key features of the Handbook and discusses certain of its practical implications for SEC-registered investment advisers advising private fund clients (“private fund advisers”).2
Background
For many years, the Staff has provided registrants with information about the examination process through a short brochure enclosed with a registrant’s exam notification letter. The Handbook is substantially longer and more operationally focused than the historical brochure, adding an examination process roadmap and detailed discussion of each step in the process, a chart of key deadlines, a “Working Together” table of reciprocal expectations and a list of online resources for registrants.
According to the Division, the Handbook reflects the Staff’s effort to approach each examination with “an accessible and collaborative mindset, not an adversarial one.” The Division’s tone of openness fits within the greater context of the SEC’s mission to increase transparency. For example, SEC Chairman Paul S. Atkins has previously stated that examinations “should not be a ‘gotcha’ exercise.”3
The Handbook’s publication follows certain other notable developments for private fund advisers, such as the absence of a standalone section on private fund advisers in the Division’s 2026 examination priorities4 and the SEC’s recent proposal to rescind the “pay-to-play” rule under the Investment Advisers Act.5 Consistent with the SEC’s agenda, the Handbook emphasizes transparency and engagement but does not alter the scope of the Staff’s examination authority or the substantive obligations of registrants.
Key features of the Handbook and certain takeaways for private fund advisers
Much of the Handbook memorializes longstanding Staff practice. However, several aspects warrant particular attention from private fund advisers.
Candidate selection and pre-examination diligence
The Handbook confirms that the examination program is risk-based and lists factors that inform the Staff’s risk assessments, including:
- prior examination history
- supervisory concerns, such as disciplinary history of associated individuals or affiliates
- tips, complaints, or referrals
- the length of time since registration or the last examination
- the registrant’s client base
- products, services and business activities that may create conflicts of interest
- material changes in leadership or key personnel; indications of vulnerability to financial or market stresses
- news and media reporting
- filings with the SEC or a self-regulatory organization
- and whether the registrant holds or has access to client and investor assets.
The reason for a particular examination is non-public, and the Handbook states that selection is not, in itself, a signal that something is wrong. The Handbook’s description of candidate selection closely tracks the Division’s September 2023 Risk Alert on assessing risks, scoping examinations and requesting documents (the “2023 Scoping Risk Alert”).6
The Handbook also states that, before initiating an examination, the Staff will likely review the registrant’s filings and websites, and that current and accurate filings make examinations more efficient and can reduce the number of findings. For private fund advisers, this means that Form ADV, Form PF and public-facing marketing content may shape the initial scope of an examination. Private fund advisers active in strategies highlighted in the Division’s 2026 priorities (such as private credit), or those that have recently experienced leadership changes, should expect that these factors may also be weighed in risk assessments.
Announcement and information requests
Most examinations begin with a brief call to a registrant’s chief compliance officer (CCO) or other regulatory contact, and the Handbook states that unannounced examinations occur only in “limited instances.” While the SEC expects that records generally should be made available within 24 hours, the Handbook states that the Staff usually provides two weeks to produce records in response to the initial information request and will grant reasonable requests for extensions or rolling productions, where appropriate.
The Handbook also encourages registrants to disclose to the Staff at the outset of an examination any other ongoing regulatory inquiries that may slow responsiveness.
The Handbook does not reproduce a sample initial information request list, but a list of certain items commonly requested of all investment advisers at the outset of an examination is included as an attachment to the 2023 Scoping Risk Alert. Private fund advisers should consider using that list, together with the Handbook, as a baseline for organizing records in advance of an examination.
The Handbook adds new specific guidance on privilege, stating that a registrant withholding responsive information on privilege grounds should provide a privilege log that identifies each withheld document and provides sufficient information for the Staff to evaluate the claim. Separately, the Staff acknowledges that the records submitted by registrants often contain sensitive information of clients, customers, or employees and commercially sensitive information.
The Handbook states that the Staff maintains such sensitive information in accordance with federal recordkeeping and information security laws, and does not publicly disclose such information unless specifically authorized. Because information produced to the Staff may nonetheless be sought under the Freedom of Information Act (FOIA), the Handbook specifically refers registrants to the Office of FOIA Services to make requests to withhold information if third parties seek disclosure under FOIA.
Private fund advisers evaluating their examination-readiness should consider reviewing their document production protocols to ensure the following:
- Information submitted to the Staff will be responsive to the requests and produced in a timely manner.
- The adviser is able to readily identify any applicable contractual confidentiality/notice obligations and any applicable privileged or otherwise sensitive information requiring special handling.
- The adviser is familiar with the process for preparing and filing FOIA exemption requests alongside its document submissions to the Staff.
Third-party requests and asset verification
The Handbook states that the Staff may request information directly from third-party service providers and agents (including custodians, administrators and auditors) for asset verification or other purposes, and that it also often contacts clients, customers or other knowledgeable persons for information gathering or verification purposes. Private fund advisers thus should anticipate that the Staff may contact their fund investors (as well as service providers) during the course of an examination.
Interviews, on-site visits and use of technology
The Handbook notes that the Staff may conduct an initial interview with the CCO or other relevant personnel to inform the examination’s scope and encourages registrants to make knowledgeable personnel available, observing that doing so may reduce the number of meetings.
Notably, the Handbook states that the Staff does not record or transcribe meetings, instructs participants not to do so, and does not consent to the use of recording, transcription, artificial intelligence notetaking tools or similar technologies. Private fund advisers that routinely use such tools for internal or external meetings should ensure that they are disabled for examination interviews and that relevant personnel are aware of this restriction.
Ongoing dialogue, exit conference and examination outcomes
The Handbook notes that the Staff will be in contact with registrants throughout an examination and encourages registrants to raise perceived misunderstandings of their policies or practices as soon as possible. It also notes that where an examination involves interpreting a new rule or applying an old rule to novel facts, the Staff will generally consult the relevant SEC policy division to help ensure consistent views.
At the conclusion of its examination of a registrant, the Staff typically conducts an exit conference, which supervisory staff may attend and for which the Staff may request the attendance of the registrant’s senior management or board members. Registrants may use the exit conference to clarify issues, provide additional information and describe actions taken or planned to address the issues raised.
The Handbook identifies three possible outcomes of an examination set out in a disposition letter:
- The examination has concluded.
- The examination has concluded without findings.
- The Staff requests corrective action (i.e., a deficiency letter), which the Handbook states is the outcome of most examinations.
None of these outcomes forecloses SEC action, including enforcement action, and the Staff may refer matters to the Division of Enforcement, a self-regulatory organization, state regulators, or criminal authorities, in some cases without an exit conference or deficiency letter (including where exigent circumstances exist).
Importantly, the Handbook states that, while not dispositive, prompt and appropriate corrective action may be a mitigating factor in considering whether an examination finding will be referred to the Division of Enforcement, although the Staff generally does not comment on the adequacy of corrective actions proposed by a registrant.
In view of the foregoing, private fund advisers should prepare senior investment and business personnel, in addition to compliance and legal personnel, to participate meaningfully during the examination process, including potentially in the exit conference. Each interaction with the Staff is an opportunity to provide clarifying information on the adviser’s business and proactively address any emerging compliance issues before they are raised by the Staff, potentially avoiding escalation of such issues into a deficiency finding or enforcement referral.
Upon receipt of a deficiency letter, private fund advisers should treat their timely response as both a substantive legal submission and a record of remediation. Careful thought must be given to the strategy of any such response, however, especially in instances where advisers reasonably suspect that the Staff has referred or may refer the matter to the Division of Enforcement or other authorities (something that the Staff need not preview to the registrant).
Additional practical considerations for private fund advisers
Although the Handbook does not change the substantive obligations of private fund advisers, it provides a published baseline against which an adviser’s readiness for, and conduct during, an examination may be assessed. Private fund advisers should consider taking the following steps when preparing for a potential examination by the Staff:
- Review the adviser's Form ADV, Form PF, websites, and marketing materials for accuracy and consistency.
- Designate and prepare a primary point of contact and knowledgeable personnel across investment, operations, finance, and compliance functions for interviews.
- Establish document production protocols to ensure prompt, responsive submissions and address privilege, confidentiality, and sensitive information concerns.
- Update policies on the use of recording, transcription, and artificial intelligence notetaking tools to address SEC examination meetings.
- Prepare senior management and compliance personnel to attend and engage during the examination process and, potentially, in the exit conference.
- Confirm that annual compliance reviews are timely, documented consistently with written procedures and followed by implementation of recommended corrective actions, including remediation of any prior deficiency letter findings.
- Test fee, offset, and expense calculations against fund documents, side letters and disclosures, and adequately disclose conflicts that actually exist.
- Review marketing materials, performance presentations and related books and records against the Division’s risk alerts.
Footnotes
1 SEC Press Release 2026-99, SEC’s Division of Examinations Announces New Exam Handbook (Oct. 1, 2026) (available at: https://www.sec.gov/newsroom/press-releases/2026-99-secs-division-examinations-announces-new-exam-handbook); SEC Division of Examinations, The SEC Exam Handbook: A Practical Guide on Process and Engagement (Oct. 1, 2026) (available at: https://www.sec.gov/files/exam-handbook.pdf).
2 Although the Handbook is addressed to registrants, exempt reporting advisers may also be subject to SEC examination, and the Handbook should be a useful reference for them as well.
3 SEC Press Release 2025-132, SEC Division of Examinations Announces 2026 Priorities (Nov. 17, 2025) (available at: https://www.sec.gov/newsroom/press-releases/2025-132-sec-division-examinations-announces-2026-priorities).
4 SEC Division of Examinations, Fiscal Year 2026 Examination Priorities (Nov. 17, 2025) (available at: https://www.sec.gov/files/2026-exam-priorities.pdf).
5 SEC Release No. IA-6994, Political Contributions by Certain Investment Advisers (Sept. 3, 2026) (available at: https://www.sec.gov/files/rules/proposed/2026/ia-6994.pdf); See our client alert entitled “SEC proposes to rescind Advisers Act ‘pay-to-play’ rule” (Sept. 18, 2026) (available at: https://www.aoshearman.com/en/insights/sec-proposes-to-rescind-advisers-act-pay-to-play-rule).
6 SEC Division of Examinations, Risk Alert, “Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting Documents” (Sept. 6, 2023) (available at: https://www.sec.gov/files/risk-alert-ia-risk-and-requesting-documents-090623.pdf). The 2023 Scoping Risk Alert includes some additional factors that inform the Staff’s risk assessments, but that are not repeated in the Handbook, including: repetitive deficient practices observed in more than one examination; significant fee- and expense-related issues; significant compliance program concerns; and use of data from third-party data services.
