On August 23, 2023, the Securities and Exchange Commission (“SEC”) adopted a new requirement for all SEC-registered advisers to “document in writing” the review of their policies and procedures under Rule 206(4)-7.
Key Takeaway(s): Advisers were largely already documenting annual reviews so the overall impact should be minimal. One key item to note, despite the requirement being part of the so called “Private Fund Rule, the annual review documentation applies to all registered investment advisers.
Amendment to the Compliance Rule
The amendment to Rule 206(4)-7 (the “Compliance Rule”) requires all SEC-registered investment advisers to review document, in writing, no less frequently than annually, the adequacy of their compliance policies and procedures and the effectiveness of their implementation. The SEC points out the amended rule “does not enumerate specific elements that advisers must include in the written documentation of their annual review” and “the documentation requirement is intended to be flexible.” The SEC goes on to list some examples of documentation while also saying “the rule does not prescribe a specific format of written documentation.” This is generally consistent with the SEC’s approach to annual reviews prior to the amendment.
However, there is one interesting snippet toward the end of the SEC’s discussion on the written documentation requirement. The SEC says “the required written documentation of the annual review under the compliance rule is meant to be made available to the [SEC] and the [SEC] staff and therefore should promptly be produced upon request.” Continuing on, the SEC states “attempts to improperly shield from, or unnecessarily delay production of any non-privileged record is inconsistent with prompt production obligations.”
Compliance Date
The compliance date for this requirement is 60 days after publication in the federal register (which has yet to occur). All SEC-registered advisers will need to document the next annual review occurring after the compliance date.
If you need help documenting your next annual review, please contact Trillium today.