IAs and RICs: General Supervisory Obligations

Overview

This Topic Page provides guidance as to the supervisory obligations to which an "investment adviser" is subject under the Advisers Act, particularly IAA Rule 206(4)-7 (compliance procedures), and, if the adviser provides services to an seC-registered investment company, pursuant to the supervisory requirements that apply to registered investment companies under ICA Section 38 and ICA Rule 38a-1. An adviser has a continuing responsibility to supervise all persons acting on its behalf. An adviser will not be deemed to have failed to supervise a person if (i) the adviser had established procedures and a system for applying such procedures that are reasonably expected to prevent and detect the conduct, and (ii) the person reasonably discharged his supervisory duties and had no reasonable cause to believe that the procedures were not being followed.

IAA Rule 206(4)-7 requires a registered adviser must establish an internal compliance program that addresses the adviser's performance of its fiduciary and substantive obligations. To accomplish this requirement, a registered adviser must designate a chief compliance officer ("CCO"), who must be knowledgeable about the Advisers Act and who has the expertise and authority to develop and enforce appropriate compliance policies. The adviser must review the adequacy and effectiveness of its policies at least annually. See also the topic page on IA Information Walls and Codes of Ethics.

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IAA Sections and Rules

ICA Sections and Rules​​