Creating a Robust Compliance Program

The Compliance Program

The objective of the compliance program is to prevent, detect and correct violations of securities laws.  To this end, investment advisers registered under Section 203 of the Investment Advisers Act of 1940 (the “Advisers Act”) are required to have a compliance program.  Rule 206(4)-7 of the Advisers Act1, commonly referred to as “the compliance rule,” has three requirements:

  1. Policies and procedures - Adopt and implement written policies and procedures reasonably designed to prevent, detect and correct violations of securities regulations;
  2. Annual review - Review, no less frequently than annually, the adequacy of the policies and procedures and the effectiveness of their implementation; and
  3. Chief Compliance Officer - Designate an individual responsible for administering the firm’s compliance program.

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