The SEC’s amended Compliance Rule goes into effect Nov. 13, 2023

October 17, 2023

The SEC gave all registered investment advisers until November 13, 2023, to comply with the amended Compliance Rule that was adopted as part of the private fund adviser reforms.

Here’s what you need to know.

The Compliance Rule (Rule 206(4)-7(b))

The rule at a glance: The SEC now requires all registered advisers to document their annual review of compliance policies and procedures, including relevant findings, in writing.

When the rule goes into effect: November 13, 2023

Why the reform matters: SEC regulations have required advisers to review the adequacy and effectiveness of their compliance policies and procedures at least once per year since 2004. The amended rule formalizes the current best practice: to thoroughly document the adviser’s review and findings in writing. For leading investment firms, the updated rule likely won’t require much or any adjustment. However, for new or smaller advisers, the requirement to document annual reviews might demand new procedures, workflows, and tools.

What advisers need: GPs need an effective way to manage fund obligations and regulatory compliance tasks, including assigning tasks and monitoring completion. To review related policies and procedures as part of an annual audit, GPs may need to create a shareable, time-stamped audit trail to aid in their written review.

An in-depth look at amended Rule 206(4)-7: All registered advisers, including those that don’t advise private funds, must document the required annual review of their compliance policies and procedures in writing. This written documentation will help the SEC assess an adviser’s compliance with the rules and identify any potential weaknesses in the compliance program.

  • Advisers must conduct a minimum of one review per year.
  • In each review, advisers 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 or applicable regulations that might suggest a need to revise existing policies and procedures.
  • The amended rule does not detail specific elements or a format advisers must use in their written documentation. The SEC intends the documentation requirement to be flexible, allowing advisers to continue using the procedures they’ve found to be appropriate and most effective.
  • Advisers must maintain the written documentation of their review in an easily accessible place for at least five years after the end of the fiscal year in which they conducted the review, the first two years in an appropriate office of the adviser.
  • The written documentation is meant to be available to the SEC, and advisers should be able to produce it promptly upon request.

How Insight by Ontra can help advisers with their new compliance obligations

  • Task workflows: Assign tasks and subtasks for fund obligation and regulatory compliance tasks, as well as for annual written compliance reviews or reports.
  • Compliance supervision: Review open tasks across funds and obligation types to determine whether teams have taken action to meet commitments. Perform quarterly compliance checks that align with internal review and sign-off processes.
  • Compliance records: Create a fund document and data export to facilitate annual compliance reviews and respond to mock or actual SEC exams.

Key resources

Get ready for the new rules now

Is your firm still relying on decentralized documents, spreadsheets, presentations, and notes to manage fund obligation compliance and record your annual reviews? Now is the time to adopt an efficient and tech-enabled system. With Insight, your firm can optimize your compliance workflows, create an audit trail, and export fund documentation and data to support your annual review.

See how Ontra Insight helps leading firms stay on top of obligations

Stay tuned

Stay tuned for more in-depth information on the new SEC rules and how Insight, Ontra’s AI-backed obligation management platform, can help private fund managers comply with investor and regulatory obligations.

Don't miss Ontra's expert insights

Thank you! We can't wait to connect

Ready to know more about Insight?

Additional Resources

Ontra is an alternative legal services provider. We are not a law firm and do not provide any legal services, legal advice, or referral services and, as a result, we do not provide any legal representation to clients, nor do we participate in any legal representation of clients. The contents of this article are for informational purposes only, and are not intended to constitute or be relied upon as legal, tax, accounting, regulatory, or other professional advice, opinion, or recommendation by Ontra or its affiliates. For assistance or guidance regarding the impact or applicability of the topics discussed in this article to your business, please consult your legal or other professional advisers.

Explore our content