Planning for the Annual Review and Reporting

Rule 206(4)-7 of the Advisers Act and Rule 38a-1 of the Investment Company Act require an Investment Adviser and a Fund, respectively, to review policies and procedures annually to determine their adequacy and the effectiveness of their implementation.

The SEC highlights specific focus areas including portfolio management processes, trading practices, proprietary trading, disclosure accuracy, and records maintenance, among other things.

In 2006, then-OCIE Associate Director for Examinations Gene Gohlke listed nine questions that SEC examiners consider in scrutinizing an annual review. Those questions still resonate today and can inform your process.

They include:

  1. Who conducted the review?
  2. What was reviewed?
  3. When was it conducted?
  4. How was it conducted?
  5. What were the findings from the review work?
  6. What recommendations were made?
  7. What is the current status of implement recommendations?
  8. What documentation was created/retained to reflect the work done?
  9. What was the involvement of senior management in the review?

To be blunt, the process should be a team effort, with different departments “owning” their subject matters. Doing so allows the CCO to keep compliance on the radar for firm employees and sets the “culture of compliance” that the SEC looks for. It cannot be stressed enough that involving management and employees outside the compliance department sets a tone firm-wide.

In our recent ComplianceCast, “Planning the Annual Review and Reporting,” consultants Allison Fraser and David Lourie go in-depth on the complex topic.

Learning objectives include:

  • Planning and Documentation
  • Testing the Adequacy and Effectiveness of Policies and Procedures
  • Reporting Annual Review Findings
  • Responding to Issues Identified by the Annual Review
  • Common Deficiencies

To download this ComplianceCast presentation, please fill out our request form by clicking here.


Subscribe to CSS Blog

CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.

Latest Content

Service Provider Due Diligence – Building Effective Partnerships

In 2009, the SEC stated at its CCOutreach Program that “when a service provider is utilized, the adviser still retains its fiduciary responsibilities for the delegated services.” This philosophy is as true today as it was 10-plus years ago. Therefore, the question becomes how do you establish a due diligence oversight program for your firm’s … Continued

SEC Adopts Changes to Reporting Forms

Regulation of Derivatives Use by RICs and BDCs Recognizing the proliferation of new derivate products in our markets, the SEC voted to adopt a new regulatory framework for the use of derivatives by mutual funds, ETFs, closed-end funds, and business development companies. The SEC’s press release stated that, “The new rule and rule amendments will … Continued

Time to Use the Bat Phone: Who to Call When a Compliance Officer Needs Help?

It seems that the burden of work continues to increase for compliance professionals in the investment management industry. While also ensuring that their compliance program is effective, compliance officers must also be aware of cybersecurity threats, business continuity plans, new regulations, changes in business strategy, and more – all while doing this under a work … Continued