SEC Updates Compliance Obligations For Investment Advisers

by Philip Morton, Investors Offshore.com

14 February 2003

The Securities and Exchange Commission voted earlier this month to amend the Investment Advisers Act of 1940 in order to increase the compliance obligations of investment professionals.

According to a statement released by the SEC, new Rule 206 (4)-7 will require investment companies and advisers to: establish suitable compliance policies and procedures to prevent violations of the federal securities laws, designate a chief compliance officer to administer these policies and procedures, and re-examine and renew said policies and procedures on a yearly basis.

The SEC document went on to explain that:

'The proposed rules would formalize the practical requirement that funds and advisers establish control systems designed to prevent violations of important investor protection provisions of the federal securities laws. The rules would provide funds and advisers the flexibility to tailor their compliance policies and procedures to fit the scope and nature of their operations.'

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