RIA Glossary / Annual Compliance & Filings

Annual Compliance Review (Rule 206(4)-7)

Quick Answer
The annual compliance review is a required yearly assessment of an investment adviser’s compliance policies and procedures, evaluating their adequacy and effectiveness in light of the firm’s current business, any regulatory changes, and any compliance issues that arose during the year.
Reviewed by Sam Carter, Director of Registration Services
Last reviewed September 22, 2026

What Is the Annual Compliance Review (Rule 206(4)-7)?

Rule 206(4)-7 doesn’t specify an exact format for this review, but it does require that the firm actually conduct one, that a designated person (typically the CCO) is responsible for it, and that the firm can demonstrate the review took place. In practice, this usually means testing the firm’s Written Supervisory Procedures against actual practice, reviewing any compliance incidents or client complaints from the year, checking for regulatory updates that affect the firm’s policies, and documenting findings along with any resulting changes to the WSPs.

Firms sometimes conflate this review with the Form ADV annual amendment, but they’re separate obligations — the compliance review assesses whether the firm’s policies are working, while the ADV amendment updates the firm’s public disclosure filing.

Why it Matters

Examiners specifically look for evidence that the annual review happened and led to concrete action where needed — a firm that can only say “we review compliance regularly” without documentation is in a weaker position than one with a dated report showing what was checked and what changed.

Frequently Asked Questions

Does the annual compliance review have to be in writing?

The rule itself doesn’t mandate a specific written format, but written documentation is considered best practice and is what examiners typically expect to see.

Is this the same as the Form ADV annual update?

No — they’re separate requirements that often happen around the same time of year but serve different purposes.
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Related Terms

Regulation S-P

What Is Regulation S-P? Regulation S-P requires two main things: a privacy notice given to clients

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