Adviser recordkeeping requirements

Abstract

Purpose

The purpose of this paper is to summarize record‐keeping requirements for Securities and Exchange Commission (SEC)‐registered advisers of private investment companies, especially hedge funds.

Design/methodology/approach

Summarizes the important record‐keeping provisions of Rule 204‐2 under the Investment Advisers Act of 1940 (the Advisers Act) in categories including accounting records; records of orders to purchase and sell securities; written communications; documents supporting performance information; lists of discretionary accounts; powers of attorney; written contracts; codes of ethics; personal securities transactions; disclosure documents; client solicitation agreements; written policies and procedures; records for advisers with custody; investment supervisory or management services; proxy voting records; coded designation for certain clients; the time, place, and manner for retention of records; records for advisers exiting the business; duplicate records; records for nonresident advisers; records for advisers previously registered with a state; and hedge fund records.

Findings

Pursuant to new Rule 203(b)(3)‐2 under the Investment Advisers Act of 1940 (“Advisers Act”), most advisers of private investment companies, especially hedge funds, will be required to register with the SEC as investment advisers. Registered investment advisers must comply with the rules and regulations of the Advisers Act, including the recordkeeping requirements of Rule 204‐2 under the Advisers Act. Although the subject of recordkeeping is perhaps unexciting, recordkeeping is a key area of regulatory focus for the SEC and its examiners, particularly as they seek to gauge the adequacy of adviser compliance and internal controls.

Originality/value

A useful summary of record‐keeping requirements for hedge funds and other private investment companies.

Citation

McGuire, W.J. (2006), "Adviser recordkeeping requirements", Journal of Investment Compliance, Vol. 7 No. 1, pp. 43-54. https://doi.org/10.1108/15285810610701609