The SEC has launched an investment adviser examination initiative to review those who have never been examined including advisers domiciled outside the United States.

If an adviser has been registered for more than three years and never been the subject of an SEC exam or is domiciled outside the U.S., an exam probably will take place.  The envisioned exams will conduct narrowly focused examinations of the targets.

Similar to the SEC’s “presence” exam program, the envisioned exams will conduct narrowly focused examinations of the targeted population, probably with an emphasis on a limited number of issues and the exams likely will take less time than a traditional risk-based examination.

About 11,000 investment advisers are registered with the SEC, 4,500 report they advise one or more private funds, such as hedge funds or private equity companies.  The Dodd-Frank Act required about 1,500 advisers to register with the SEC.

A word of caution, start preparing now.