It’s been over a decade since the Securities and Exchange Commission (“SEC”) adopted Rule 206(4)-7 under the Investment Advisers Act of 1940, and Rule 38a-1 under the Investment Company Act of 1940. Despite the passage of time, Rule 206(4)-7 and 38a-1 (commonly referred to in the financial industry as the “Compliance Program Rules”) remain the overarching core of SEC investment adviser and investment company (mutual fund) examinations.
Since the effective date of the Compliance Program Rules on February 5, 2004, the SEC has issued regulatory guidance and brought a number of enforcement cases against advisory firms and mutual funds pertaining to the different requirements under these two rules. This month’s Risk Management Update focuses on some of the more recent SEC activity regarding the annual review requirement under the Compliance Program Rules and outlines various workable steps firms can take to help ensure their annual review process is sound and reasonably designed to meet both the letter and spirit of the regulations.
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