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How does a registered investment adviser determine what needs to be included in its written supervisory and compliance policies and procedures?


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The first step to determine what areas should be covered in an investment adviser’s written supervisory and compliance policies and procedures is to perform a risk analysis of the investment adviser. This means that the registered investment adviser should identify conflicts of interest, business practices, arrangements, and other compliance factors creating risk exposure for the investment adviser and its clients in relation to its operations. Once this has been done, the investment adviser should begin developing written supervisory and compliance policies and procedures that specifically address those risks and conflicts of interests and the controls that the investment adviser will put in place to supervise and mitigate those areas of concern. In many regulatory audits of registered investment advisers, one of the first items that the securities regulator will ask for is the investment adviser’s risk analysis.

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