In a Risk Alert (Alert) published on April 26, 2022, the U.S. Securities and Exchange Commission (SEC) Division of Examinations (EXAMS) provided an overview of compliance deficiencies and weaknesses observed by the EXAMS staff during examinations of investment advisers. Specifically, the deficiencies noted relate to Section 204A of the Investment Advisers Act of 1940 (Advisers Act) and Rule 204A-1 thereunder (Code of Ethics Rule), with particular focus on controls designed to prevent the misuse of material nonpublic information (MNPI).
This Sidley Update summarizes the Alert and offers our take on the staff’s observations with some considerations for advisers as they review and update their existing policies and procedures in preparation for future examinations.
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