September 7, 2010
Rule 206(4)-7 under the Investment Advisers Act of 1940 (the "Advisers Act") requires registered investment advisers to adopt and implement written policies and procedures that are reasonably designed to prevent violations of the Advisers Act by the adviser and any of its supervised persons within the meaning of Advisers Act section 202(a)(25). The adviser’s policies and procedures must also be reasonably designed to detect and promptly address any violations that occurred. Advisers Act Rule 206(4)-7(b) further requires investment advisers to undertake an annual review to determine the adequacy and effectiveness of their procedures in light of internal and external developments affecting the firm.
In her article, "Assessing Your Risk Program: Is Your Review Current?" prepared for the IAA Newsletter, K. Susan Grafton of Gibson Dunn outlines the review protocol and considerations for establishing an effective risk assessment program.
Reprinted with permission from IAA Newsletter (September 2010), © Investment Adviser Association.