1. SEC Examinations John Walsh April 18, 2007

2. Standard Disclaimer The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC Commissioner or employee. This outline expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff. The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC Commissioner or employee. This outline expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.

3. Agenda A. Briefing on the SEC Exam Program B. Exam Program FAQs C. Top Ten Exam Hot Topics

4. A. The SEC Exam Program  Cause Exams & Sweeps Fast & flexible response to emerging risks Fast & flexible response to emerging risks Examples: Examples: Revenue sharing by funds and brokers Revenue sharing by funds and brokers  Statistical Exams Random sample of low risk advisersRandom sample of low risk advisers Goals:Goals: Test risk systemTest risk system Learn the unexpectedLearn the unexpected Show the flagShow the flag Cost effective oversightCost effective oversight  Regular Exams Regular oversight of critical firms & functionsRegular oversight of critical firms & functions Examples:Examples: Large brokers’ internal controlsLarge brokers’ internal controls Higher risk advisersHigher risk advisers

5. Number of Examinations in 2006 1) Self-Regulatory Organizations: 43 2) Broker-Dealers: 741 3) Investment Advisers: 1,346 4) Investment Company Complexes: 308 5) Others:* 184 TOTAL = 2,622 * PCAOB, 175 Transfer Agents, 8 Clearing Corp’s

6. Part of a Comprehensive Program Commission Division of Market Regulation Broker Dealers SROs Division of Investment Management Mutual Funds Advisers Division of Enforcement Investigations & Public Actions OCIE Examinations

7. B. Exam Program FAQs 1) Do examiners visit branch offices? 2) Will the examination be a surprise? 3) Will examiners ask for e- mails? 4) How much time will the exam team allow you to produce records? 5) Can you claim the attorney- client privilege? 6) Will you get an exit conference? 7) How long will it take to finish the exam? 8) How many exams are referred to enforcement? 9) Should you fully implement your representations? 10) What do you do if you have a question or concern about an exam?

8. C. Top Ten Exam Hot Topics 1) Municipal Securities 2) Insider Trading 3) Anti-Money Laundering 4) Sales to the Military 5) Identity Theft 6) Dual Registrants 7) Seniors 8) Variable Insurance Products 9) Proxies 10) Stock Loans

9. Questions? Thank you.