Investment firms must stay up-to-date of the latest requirements to ensure compliance and maintain their reputation. Annual reviews play a crucial role in this process, providing a comprehensive assessment of an organization’s adherence to regulatory standards.
To help firms navigate this critical aspect of regulatory oversight, we’ve gathered the key rules and regulatory updates to keep in mind as you conduct your firm’s annual review.
Your guide to the rules and regulatory updates that might impact your firm’s 2024 annual review
The Compliance Programs Rule, SEC Rule 206(4)-7, adopted in 2003, established the foundamental framework for annual compliance reviews. This regulation required all SEC-registered investment advisers not only implement and maintain written policies and procedures designed to prevent violations of the Investment Advisers Act of 1940 (Advisers Act) and its accompanying regulations.
On November 13, 2023, a set of amendments went into effect that require all SEC-registered advisers to document their annual compliance reviews in writing. This documentation requirement underscores the significance of conducting thorough and well-documented annual reviews to demonstrate compliance with regulatory obligations.
While this recent change might be top of mind, given how new it is, it’s important to keep in mind other regulations that might impact your firm’s annual compliance review.
Form PF requirements
The SEC’s Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, plays a crucial role in annual compliance reviews. This form requires advisers to provide detailed information about their private funds, including fees, expenses, performance and key events. This information enhances transparency, strengthens risk monitoring and facilitates regulatory oversight.
NASAA Model Rule on investment adviser representative continuing education
This rule complements annual compliance reviews by requiring investment adviser representatives to undergo ongoing continuing education. This requirement ensures that representatives maintain the necessary knowledge and skills to provide competent investment advice.
2024 SEC Exam Priorities
The 2024 SEC Exam Priorities included key focus areas for individual firm types as well as risks which are likely to impact participants across the financial landscape. Some of the broader risks included:
- Digital assets
- Cybersecurity
- Anti-Money Laundering
Recent SEC Risk Alerts
SEC Risk Alerts provide firms with insight into critical compliance deficiencies which the SEC has noted through examinations. Some of the recent Risk Alerts include:
- Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting Documents
- Examinations Focused on Additional Areas of the Adviser Marketing Rule
- Safeguarding Customer Records and Information at Branch Offices
- Observations from Examinations of Newly-Registered Advisers
Interested in learning more about tips and best practices for your annual review process? Download COMPLY’s 2024 Annual Review Guide!
Conducting Your Annual Review with COMPLY
Annual compliance reviews are not merely one-time events; they represent an ongoing process of evaluating and enhancing an organization’s compliance posture. By aligning your annual review practices with the evolving regulatory landscape, your firm can effectively manage risk, protect its clients and foster a culture of compliance.
COMPLY offers tailored consulting and technology services to help your firm conduct a thorough annual compliance review.
Annual Review Technology: Provides you with a guided, digital and documented Rule 206(4)-7 Annual Review. Aligning key regulatory documents, firm organization and key regulatory developments, the Annual Review Tool comprehensively reviews and documents your firm’s compliance program, evaluating risk and identifying areas for improvement.
Annual Review Services: Engage expert support and hands-on guidance for your Annual Review with our software and annual review services. Your expert compliance consultant will keep your firm on track with monthly check-ins, review and set up of regular compliance testing activities and documentation of results.
By using our tools and having COMPLY as your reliable partner in compliance, you can ensure your firm has an annual compliance review that meets the standards of the evolving regulatory landscape.
Need further guidance with your annual compliance review? Let’s talk!