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Your day was going great.  You helped a client with a particularly complex situation.   Another client submitted the paperwork to transfer accounts to your firm.  You did not have to deal with a bulldozer trying to demolish your home.  Then you received a message from a “” or “” email address, which asked you to access a portal for additional information.  Or you received a letter from your state regulator.  You learn that your regulator opened an examination of your firm and seeks a comprehensive list of documents and information in two weeks.

Now what?

Strangely enough, and while I am sure that this was unintended, and it is certainly not a part of BBC radio broadcasts and films of the book, the late Douglas Adams offered a number of tips for handling regulatory exams in The Hitchhiker’s Guide to the Galaxy. I previously discussed:

The last (at least for now) is:

So long and thanks for all the fish.1

DON’T: Simply dump the responsive documents on your regulator.

DO: Provide your regulator with a concise, organized response.

Following up on an earlier point, the speed with which you respond to your regulator does not demonstrate your compliance with the applicable regulatory standards.  Your response does.  Take the time needed to prepare a cover letter that, if possible, indicates which documents respond to which requests.  A cover letter also affords you the opportunity to provide context to certain documents, and as noted above, explain why you do not have certain documents that the regulators requested.  Such information might reduce – or, as happened in one exam that I handed, eliminate – the regulator’s need to issue follow-up requests.

Of course, The Hitchhiker’s Guide to the Galaxy is supposed to be fun.  As noted in its foreword, Adams “left sentences that will make you laugh with delight as they rewire the back of your head.”  And, of course, there is nothing fun about a regulatory exam.  That said, things that are funny often contain kernels of truth or wisdom.  While I am sure that Adams would be appalled that his work was analyzed in this context, his kernels in The Hitchhiker’s Guide to the Galaxy are helpful principles in responding to regulatory exams.

Don’t panic and please contact me at or 571.317.0605 if you have any questions or seek assistance with a regulatory matter involving the SEC, FINRA or a state regulatory agency.

Because you want to spend more time serving your clients, not your regulators.

  1. See The Hitchhiker’s Guide to the Galaxy, Del Rey Edition for Kindle, at page 105. ↩︎