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The annual compliance review (Rule 206(4)-7) is the single most critical task for any registered investment adviser (RIA). This is not merely a "check-the-box" exercise—it is your firm’s primary shield against regulatory findings during an SEC examination.
The High-Risk Areas Of Focus For The SEC
When examiners review your annual report, they are looking for evidence that you have thoroughly tested high-risk, high-velocity areas. Your review must demonstrate that your program is keeping pace with industry evolution, especially regarding:
- Marketing & Social Media Use: Are your digital communications, testimonials, and endorsements fully compliant with the new marketing rule?
- Electronic Communications: Are you capturing, reviewing, and archiving all required communications (texts, encrypted apps, etc.)?
- Best Execution: Do you have a documented, consistent process to proves that you’re obtaining the most favorable terms for your clients’ transactions?
- Due Diligence On Third-Party Vendors: Have you implemented a strong vendor risk management (VRM) framework?
From Checklist, To Critical Shield
An effective annual review provides the detailed audit trail that satisfies an examiner. It moves past simply restating policies and focuses on testing and remediation. If you can’t prove you tested a policy, the SEC will assume that a deficiency exists.
AdvisorLaw specializes in transforming this process by focusing on the three pillars of a successful review:
- Robust Framework: We provide a comprehensive structure to test your existing policies and procedures against the latest SEC guidance.
- Proactive Remediation: We help you identify deficiencies before an exam and implement corrective action immediately.
- Comprehensive Documentation: We assist with the creation of clear, thorough documentation that demonstrates compliance effectiveness and the adequacy of your CCO oversight.
The next SEC exam is a matter of when, not if. Don’t let your annual review become a liability.
Contact AdvisorLaw today to benchmark your 2025 annual review process and make sure that you are fully prepared for the next examiner review.