Conducting A Successful Annual Compliance Program Review

SEC-Required Annual Compliance Program Reviews

In accordance with the amendment of Rule 206(4)-7 of the Advisers Act (Final Rules), all registered investment advisers (including those that advise private funds, in addition to those that do not advise private funds) are now not only required to perform an annual compliance program review, but also maintain written documentation of it. This requirement aims to prompt advisers to consider the impact of new regulations or changes in business practices on their operational framework. Shortcomings in documenting these annual compliance program reviews or the failure to conduct them can lead to penalties during regulatory examinations, a common finding by the SEC.

Demonstrating that an annual review took place is critical for investment advisers. Even in years where no material changes are made, due to the ongoing effectiveness and relevance of policies and procedures, it is essential to meticulously document the annual review.

Comprehensive in scope, annual compliance reviews should not only account for new regulations and altered business practices but also extend to areas such as client agreements and disclosures, advertising, regulatory filings, custody of client assets, business continuity and disaster recovery planning, cybersecurity, and conflicts of interests. The review should encompass any compliance issues from the previous year, changes in the investment adviser's business activities or of its affiliates, and changes in the Advisers Act or any other relevant regulations that may necessitate policy or procedure revisions.

For More Information

For more information about the Final Rules you can refer to our blog.

How Coast to Coast Compliance Can Help.

Coast to Coast Compliance can perform an independent annual review of your firm’s compliance program. We will conduct a comprehensive review of the consistency and adequacy of your firm’s policies and procedures, as well as the completeness and effectiveness of its overall compliance program. We will provide a written annual review report documenting the scope of our review, relevant findings, and any resulting recommendations.

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