Regulatory Round-Up November 2026

SEC Annual Compliance Reviews: A Practical Checklist for RIAs

For RIAs, the Annual Compliance Review is both a regulatory requirement and an opportunity to evaluate whether your firm’s compliance program reflects its current operations, addresses evolving risks, and functions as intended.

On September 14, 2026, the SEC's Division of Examinations published a risk alert regarding investment adviser Annual Compliance Reviews. Under Rule 206(4)-7 of the Investment Advisers Act, SEC-registered investment advisers are required to review their compliance policies and procedures at least annually to assess their adequacy and the effectiveness of their implementation. These reviews are also frequently requested during SEC examinations.

The risk alert reinforces existing obligations and highlights common deficiencies identified during examinations, providing RIAs with an opportunity to assess and strengthen their own review process.

What Should an Annual Compliance Review Consider?

An Annual Compliance Review should evaluate several key factors, including:

• Any compliance matters that arose during the year.
• Any changes in the business activities of the adviser or its affiliates.
• Any changes in the Advisers Act or applicable regulations that could trigger revisions to the adviser's policies and procedures.

The review should also consider whether the firm's documented policies align with its actual business practices and whether its compliance controls are operating effectively.

5 Common Annual Compliance Review Deficiencies

The SEC's risk alert identifies five areas where advisers have demonstrated deficiencies during examinations, offering insight into areas where firms may need to improve their annual review practices.

1. Timeliness of Annual Reviews: Firms must complete their compliance reviews at least annually. Newly registered advisers must complete their first review within 12 months of registration.

2. Completeness of Policies and Procedures: A firm's compliance policies must include procedures that provide clear instructions for completing the Annual Compliance Review. These procedures should be appropriately tailored to the firm's business activities and risks.

3. Alignment Between Assessments, Policies, and Practices: Firms must follow their established internal policies, including requirements for documentation and ongoing compliance testing. Annual review assessments should reflect the firm's actual practices and the controls outlined in its compliance program.

4. Documentation of Annual Reviews: Firms must maintain documentation created to support the findings of their Annual Compliance Review. Supporting records help demonstrate the scope of the review, the testing performed, and the conclusions reached.

5. Resolution of Corrective Actions: Identifying deficiencies is only part of the process. Firms must follow through on recommended corrective actions and implement necessary changes identified during the Annual Compliance Review.

Together, these findings reinforce the importance of conducting a review that goes beyond checking a box. An effective process connects policies, testing, documentation, and corrective action.

Questions to Ask Before Beginning Your Annual Review

Before starting the review, firms should consider whether changes to their business or operations have introduced new compliance considerations. Questions to ask include:

• Did the firm experience any material business changes, such as ownership changes, new entities or affiliates, or new offices?
• Did the firm enter into any new business agreements with service providers or affiliates?
• Did the firm add new revenue streams or revise its fee schedule?
• Did the firm begin offering new products?
• Did the firm experience any compliance breaches?

These questions can help identify areas that require additional attention and ensure the review reflects how the firm currently operates.

Annual Compliance Review Checklist for RIAs

A strong Annual Compliance Review connects what your policies say, what your firm does, and the actions taken to address identified gaps. The following checklist provides a useful framework for organizing your Annual Compliance Review and tracking its progress.

Annual Review Checklist

⃞ Schedule the review and put it on your calendar

⃞ Review prior year's action items

⃞ Identify business changes

⃞ Identify regulatory changes

⃞ Update the conflicts/risk log

⃞ Test existing key controls

⃞ Document findings

⃞ Implement corrections

⃞ Retain supporting records

For each step, identify the responsible team member, expected completion date, supporting documentation, and any necessary follow-up. This helps establish accountability and creates a more repeatable review process.

Practical Tips for a More Effective Annual Review

Beyond completing the checklist, a few additional practices can help firms conduct a thorough review and address potential gaps.

1. Schedule the review - Ensure the Annual Compliance Review is formally documented in your firm's compliance calendar, with sufficient time allocated for testing, documentation, and follow-up.

2. Review existing compliance commitments - Search your Compliance Manual and Code of Ethics for any items your firm has committed to reviewing or testing regularly.

3. Update your conflicts and risk assessments - Consider business or regulatory changes that may affect your firm's risk profile, and confirm that your policies reflect those changes. Examples include:

• New affiliates
• New sub-adviser agreements
• Updated fee schedules
• New service providers
• Promoters
• High-risk items identified in your Risk Matrix

4. Review prior SEC examination findings - Summarize any SEC examination deficiency letters and confirm that corrective actions were taken in a timely manner.

5. Follow up on prior-year recommendations - Revisit last year's review and verify that recommended changes were implemented. Document any outstanding items, assign responsibility, and establish target completion dates.

Turn Your Annual Review Into an Actionable Compliance Process

Beyond satisfying a regulatory obligation, an Annual Compliance Review allows RIAs to identify gaps, strengthen internal controls, and ensure their compliance program keeps pace with the business.

The key is consistency: establishing a repeatable process, maintaining supporting documentation, and following through on corrective actions. With the right structure, firms can reduce administrative complexity while building a compliance program that supports ongoing operations and growth.

True West Consulting partners with RIAs to make compliance more manageable. From annual review planning and testing to documentation and remediation, our team provides practical, tailored support to help firms navigate regulatory requirements with greater clarity and confidence. Connect with our team to learn how we can support your firm's Annual Compliance Review.