Annual Review
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The SEC
Compliance Program Rule requires each federally registered
investment adviser to review its compliance policies and procedures
at least annually to determine their adequacy and the effectiveness
of their implementation. In IA Release 2204 the SEC provides
guidance regarding the annual review process by stating that the
review process should consider any compliance matters that arose
during the previous year, any changes in the business activities of
the adviser or its affiliates and any changes in the Advisers Act
and/or rules that might suggest a need to revise the policies or
procedures. The SEC also suggests that advisers consider conducting
interim reviews in response to significant compliance events,
changes in business arrangements, and regulatory developments.
The first annual review must be completed no later than eighteen
months after the adoption or approval of their compliance policies
and procedures which for most firms will be no later than April 5,
2006, and annually thereafter.
Rule 206(4)-7 does not specify who must conduct the review. Many
firms have delegated this responsibility to the CCO while others
have decided to hire an independent party to conduct all or a part
of the review in order to provide another set of eyes in identifying
actual or potential weaknesses.
The professional staff at SCA has developed an annual review program
for firms that wish to outsource all or a part of the annual review
function. SCA staff has significant experience in developing
compliance systems and conducting regulatory audits for SEC
registered investment advisers, both large and small.
