Quick Answer
A firm demonstrates that its investigation was reasonable through the written record it keeps, not through the underlying work alone. Useful records describe meetings held, tasks performed, documents and information reviewed, the results of those reviews, when events occurred, and who attended or conducted them.
Every other topic in this unit describes work a firm has to do. This one describes proof: what a firm keeps to show, after the fact, that the work actually happened.
What Should the Investigation Record Show?
To demonstrate that it performed a reasonable investigation, a firm should retain records documenting both the process and the results of that investigation. Useful records include:
- Descriptions of meetings held during the investigation, including meetings with the issuer or other parties
- The tasks performed
- The documents and other information reviewed
- The results of those reviews
- The dates events occurred
- Who attended the meetings or conducted the reviews
Think of it this way: A regulator reviewing the file after the fact was not in the room. The record has to answer the same questions a reporter would ask: who was involved, what was done, what did it turn up, and when did it happen.
Exam Tip: Gotchas
- "We did the work" is not enough without a record. The documentation itself, not just the underlying inquiry, is what demonstrates that the investigation was reasonable.
What Should You Check on Exam Day?
- Treat documentation as a separate requirement from the investigation itself, not an automatic byproduct of it.
- Confirm a scenario's records capture both process (meetings, tasks, dates, attendees) and results (documents reviewed, findings).
- Watch for a stem where a firm did adequate underlying work but kept no record. The investigation still fails to demonstrate reasonableness.
- Remember records should cover meetings with parties beyond the issuer, not just issuer meetings.