Samples / RIA / Deep dive / Determination methodology
Deep dive — methodology

How the A / B / C determination is derived

Every $499 Snapshot lands on exactly one overall determination. Not a color code, not a health score — an A/B/C determination tied to attestation stance. Here is exactly how it is derived.

The three categories

CategoryMeaningAttestation stance
A No high-severity drift events. No client-group differential signal. Baseline vs recent distributions match within threshold. Sufficient for attestation. Signed evidence on file.
B Medium-severity drift or single-event high-severity without client-group differential signal. Aggregate metrics stable. Conditional. Named remediation + re-audit within a defined window supports attestation.
C Multiple high-severity drift events, or a client-group differential pattern in the recommendation stream. Insufficient. Firm should not represent the AI as SEC Reg BI-defensible or SEC-exam-ready until remediation completes.

The evidence chain

  1. Sensor thresholds active during the audit:
    • Mean-shift threshold: 1.5 standard deviations from baseline
    • Variance-ratio threshold: 1.5x baseline
    • KL-divergence threshold: 0.2
    • Client-group differential threshold: 12% shift across client groups
  2. Event classification:
    • Any single-threshold cross → medium-severity event
    • KL-divergence > 1.0 OR client-group differential signal → high-severity event
  3. Category assignment:
    • 0 high-severity + 0 client-group differential → A
    • 1-2 high-severity, no client-group differential signal → B
    • ≥ 3 high-severity or any client-group differential signal fired → C

Why this sample lands on C

8 high-severity drift events, recurring on R3 across the audit period, with R3 active-alpha lane rate rising from 22% to 68%. The high-severity event count alone is sufficient for C. The R3 recurrence pattern independently confirms it. The determination is not marginal.

Why the A/B/C structure matters

Continuous-scale scores (0-100 dashboard, red/yellow/green tri-lights, "compliance health" percentages) push operators toward "just above the threshold" gaming behavior. A/B/C determinations force a single stance question:

Would you sign the attestation as-is today? A/B/C answers the question that SEC exam staff, state securities commissioners, FINRA enforcement, boards, and E&O carriers actually ask — instead of the question the vendor's dashboard prefers.

How does this help me?

Knowing your category BEFORE the SEC exam letter, state securities-commissioner inquiry, FINRA enforcement notice, or E&O renewal questionnaire lands is the whole value of the $499 discipline.

Read: The value of knowing your category first →

$499 Snapshot. 3 business days.

Get your firm's A / B / C determination on your actual AI recommendation surface — before someone else's question forces the answer.

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