Testing Is an Integral Component of Compliance Programs

Testing is one of the essential tools advisers use to fulfill their obligations under Rule 206(4)‑7 of the Investment Advisers Act of 1940 (Compliance Rule), which requires advisers to review the adequacy and effectiveness of their compliance policies and procedures. Advisors should test the 10 areas listed in the Compliance Rule’s adopting release that the SEC expects every compliance program to cover, including safeguards for the privacy protection of client records and information. This article distills insights offered during an ACA Group presentation on the role of testing in a compliance program, hallmarks of effective testing, and testing design and implementation. See “More Regulators Accept New Tool to Streamline Companies’ Cyber Compliance” (Jan. 26, 2022).

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