Risk-based exams could be shorter than traditional cyclical exams for investment firms that demonstrate good practices. "As we see there are issues and concerns, let's try to go deeper," he says. "But if we don't, let's not necessarily continue--if it means doing it at the cost of another registrant who has never been visited and who might have some risks."
OCIE would complement risk-based exams with random spot checks on varying issues, such as how investment firms use asset-backed securities. Spot checks would also apply to investment firms with low risk profiles, di Florio says. He believes the combination of risk-based exams and random samplings will likely keep advisers on their toes, because they'll be less likely to gauge which issues are of interest to the agency.
"It's never going to be quite clear that you can game the system by just by focusing on three issues that you know are hot topics," he says.
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