Deficiency Letter
Contents
Deciphering the Deficiency Letter: Understanding SEC Compliance
Unraveling the Deficiency Letter
A deficiency letter, issued by the Securities and Exchange Commission (SEC), signifies significant omissions or deficiencies in a registration statement or prospectus. Typically sent to registrants of public stock offerings, it may also indicate regulatory compliance issues in an investment adviser's program.
Navigating the Deficiency Letter
When a deficiency letter arrives, it often disrupts the registration process, delaying the issuance of securities. Moreover, it may be accompanied by a stop order, preventing the sale of securities until deficiencies are resolved. Investment advisers must promptly address deficiencies outlined in the letter to enhance their regulatory compliance.
Diverse Types of Deficiencies
Deficiencies can vary in severity, ranging from minor record-keeping lapses to significant regulatory breaches. Common compliance deficiencies include failure to implement annual compliance policies, amend Form ADV as required, file Form PF, or meet Custody Rule requirements. Many advisers struggle with compliance due to the complexity of regulations, often requiring time to rectify deficiencies.