SEC examination observations regarding annual compliance reviews under Advisers Act Rule 206(4)-7 and related considerations for investment advisers.
The SEC's Division of Examinations recently published observations regarding investment advisers' annual compliance reviews under Rule 206(4)-7 of the Investment Advisers Act of 1940. The September 14, 2026 Risk Alert provides a timely reminder that the annual review is intended to assess both the adequacy of an adviser's compliance policies and procedures and the effectiveness of their implementation. Under the Compliance Rule, SEC registered investment advisers must review their compliance policies and procedures no less frequently than annually. The SEC has stated that the review should consider compliance matters arising during the prior year, changes in the adviser's or its affiliates' business activities, and regulatory developments that may warrant revisions to existing policies and procedures. Significant compliance events or changes in business arrangements may also warrant review outside the ordinary annual cycle.
The annual review should extend beyond confirming that written policies exist. The Rule requires advisers to assess the effectiveness of their implementation, and Rule 204-2 requires advisers to maintain records documenting the annual review. As firms introduce new products, technologies, service providers, investment strategies and business arrangements, the annual review provides an opportunity to assess whether the compliance program continues to correspond to the firm's actual operations.
The SEC's recent observations reinforce the importance of treating the annual compliance review as a substantive assessment of the firm's compliance program rather than a recurring administrative exercise. For advisers approaching year-end, the Risk Alert also provides a useful framework for evaluating whether developments during 2026—including changes to business activities, regulatory obligations and compliance matters—have been appropriately incorporated into the firm's annual review process.
📌 2026 Consideration: An effective annual review should demonstrate not only that a compliance program has been reviewed, but that the adviser has considered whether its policies and procedures remain adequate and are operating effectively in light of the firm's current business.
RegComp Financial continues to assist investment advisers with annual compliance reviews, compliance testing and related regulatory matters.
SEC examination observations regarding annual compliance reviews under Advisers Act Rule 206(4)-7 and related considerations for investment advisers.
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