The U.S. Securities and Exchange Commission issued a Risk Alert on September 14, 2026, targeting serious deficiencies in how registered investment advisers conduct their annual compliance reviews.
The alert stems from the Commission’s ongoing examination programme, which routinely scrutinises whether advisers are meeting obligations under what is commonly referred to as the Compliance Rule.
That rule requires SEC-registered investment advisers to adopt written compliance policies and procedures and to review them annually for adequacy and effectiveness.
The Commission found that a number of advisers simply failed to conduct reviews on time, with some omitting entire years or stretching review periods beyond the required 12-month window.
In some cases, advisers incorrectly treated compliance training sessions or annual staff attestations as substitutes for a formal compliance review, which the Commission made clear does not meet the standard.
The SEC also observed that advisers who did conduct timely reviews frequently failed to follow their own written procedures, skipping required workpapers, ignoring defined scope, or reviewing outdated versions of their own policies.
A particularly concerning finding involved misalignment between written compliance programmes and actual business practices, with examiners identifying gaps in fee billing, proxy voting, and custody arrangements.
Proxy voting stood out as a notable area of inconsistency, with some advisers maintaining policies stating they would vote proxies in clients’ best economic interests while disclosing to clients that they did not vote proxies at all.
Documentation failures were also widespread, with advisers creating testing records and corrective action recommendations during reviews but then failing to retain that material in their books and records as required under Rule 204-2 of the Advisers Act.
Perhaps most troubling to regulators was the pattern of advisers identifying deficiencies through their own review processes but then failing to act on them, with some annual review reports falsely indicating that corrective actions had been completed.
Authors Mittal Patel, Joseph C. Antonakakis, and Jeffrey A. Lang of Stark & Stark noted that advisers should consider whether significant compliance events or regulatory developments warrant an interim review before the next scheduled annual assessment.
The Risk Alert reinforces that the Commission views annual compliance reviews as substantive obligations, not procedural formalities, and expects firms to document results thoroughly and resolve identified deficiencies without delay.
Advisers operating with incomplete procedures, inconsistent practices, or poor record-keeping now face heightened scrutiny as the SEC signals it will continue pressing this issue through its examination programme.