Investment companies and investment advisers should be aware that the Securities and Exchange Commission makes a practice of surprise visits to get a candid look at the firm, warned John Walsh, SEC chief counsel in the Office of Compliance Inspections and Examinations, at an American Conference Institute-sponsored forum Tuesday in New York. The SEC rarely gives notice when it examines investment companies, Walsh said. "The most important information we will get is in those first few minutes," he said.

With advisers, the SEC often arrives unannounced on the initial visit, he said. Advanced notice is typically given for subsequent visits. "We do it unannounced to get a candid look at the operation," he said. When examinations are announced, Walsh said the most successful firms gather documents pertinent to the issues outlined in the examination notice and be ready to discuss the issues upon the SEC's arrival. "Many successful examinations start with the registrant taking a very active role in them," he said.