RIA Compliance Program Rule Implementation

The ria compliance program rule implementation requirement means you must maintain written policies and procedures reasonably designed to prevent Advisers Act violations, designate an empowered CCO to administer them, and perform an annual review that assesses adequacy and effectiveness with written documentation. Operationalize it by mapping your business activities to specific policy modules, testing controls, documenting findings, and tracking remediation to closure.

Key takeaways:

• Build the program around how your firm actually operates, not a generic manual ¹.
• Treat the annual review as an effectiveness assessment with written workpapers and a written report ¹.
• Formalize CCO authority, reporting, and resources so compliance can challenge the business and drive change ¹.

This page translates the ria compliance program rule implementation requirement into an execution-ready playbook for a Compliance Officer, CCO, or GRC lead. The operational target is SEC Advisers Act Rule 206(4)-7’s core expectation: written policies and procedures reasonably designed to prevent violations, administered by a designated CCO, and reviewed at least annually for adequacy and effectiveness with written documentation ¹.

Your exam risk is rarely that you “don’t have a manual.” It is that the manual does not match the business, the CCO cannot enforce it, or the annual review reads like an activity log instead of an analysis of whether controls worked ¹. The 2023 change that exam teams have focused on is written documentation of the annual review, so your workpapers and final memo need to stand on their own ¹.

Use this page to (1) define scope, (2) implement the minimum set of governance and control routines that make the program real, and (3) retain evidence that examiners consistently ask for. Where tooling helps, Daydream fits best as a system of record for testing, issue management, policy updates, and exam-ready evidence packets, without changing your compliance judgment.

What the requirement means in plain English

The requirement is to run a living compliance program, not a binder. You must:

1. Write policies and procedures that are reasonably designed to prevent violations of the Advisers Act, given your actual products, clients, and operating model ¹.
2. Designate a CCO who administers the program with real authority and access ¹.
3. Review the program at least annually and document, in writing, whether the policies are adequate and effective, plus what you will change ¹.

A practical test: if you had to prove next week that your compliance program detects problems, escalates them, and fixes root causes, could you show it with dated artifacts?

Who it applies to (and operational context)

Primary scope: SEC-registered investment advisers implementing the compliance program rule ¹.

Operational contexts that change “reasonably designed”:

• Multiple strategies (e.g., discretionary SMAs plus private funds).
• Use of third parties (prime brokers, administrators, custodians, pricing services, marketers).
• Higher conflict density (performance fees, allocations, side letters, proprietary products).
• Heavier data and systems footprint (model portfolios, OMS/EMS, client portals, remote workforce).
• Dual registrants or affiliates where brokerage/advisory boundaries can blur ¹.

If you are dual-registered or affiliated with a broker-dealer, you may also align with supervisory expectations from the FINRA Rulebook, but this page focuses on the RIA compliance program implementation baseline ².

Regulatory text

Provided excerpt: “RIA Compliance Program Rule Implementation” ².

Operator interpretation you can execute: Treat this as an implementation wrapper around SEC Rule 206(4)-7 expectations: maintain written policies and procedures reasonably designed to prevent Advisers Act violations, designate a CCO to administer them, and conduct an annual review of adequacy and effectiveness with written documentation ¹.

What matters operationally is whether each policy:

• maps to an identifiable risk and a business process,
• has an owner and a control routine (pre-trade, post-trade, periodic, event-driven),
• produces evidence, and
• gets updated when the business or rules change ¹.

What you actually need to do (step-by-step)

Step 1: Define your compliance program scope from your business map

Create a one-page “business inventory” that becomes your compliance table of contents:

• Products/strategies, client types, fee types, trading methods, custody model.
• Material third parties and what they do (custody, trading, valuation support, marketing support).
• Key systems (portfolio accounting, CRM, email archive, OMS).
• Conflicts inventory (allocation, proprietary trading, gifts/entertainment, outside business activities).

Output: Business inventory + risk register tied to policy modules ¹.

Step 2: Build policy modules that match real workflows

Your manual should be modular so updates are contained. Typical modules (tailor to your firm):

• Code of Ethics and personal trading.
• Trading practices: allocations, best execution, errors, trade surveillance.
• Marketing/communications review and substantiation.
• Custody and client asset safeguards.
• Conflicts management and disclosures.
• Books and records.
• Privacy and information security.
• Regulatory filings (Form ADV maintenance and delivery practices).
• AML (only if applicable to your firm’s regulatory footprint, document your applicability decision).

Control design rule: Every module needs (a) a control description, (b) frequency or trigger, (c) responsible role, (d) evidence produced.

Step 3: Designate and empower the CCO in governance documents

The CCO cannot be “responsible” without authority. Put the following in writing:

• Reporting line (direct access to CEO/board or equivalent senior governance).
• Access to records and personnel.
• Role in new product/service approvals.
• Escalation path when business rejects compliance recommendations.
• Time allocation and resourcing expectations ¹.

Artifact: CCO designation letter + job description + org chart + governance policy or resolution ¹.

Step 4: Create a compliance testing and monitoring plan tied to the modules

Translate policies into a testing calendar and exception handling:

• Define what gets tested (samples, reports, reconciliations, attestations).
• Define how exceptions are triaged, documented, remediated, and closed.
• Track repeat findings as root-cause issues, not isolated misses.

Daydream can serve as the workflow backbone: testing checklists, evidence attachments, exception tickets, remediation owners, and closure sign-offs. The point is not the tool; the point is a durable audit trail.

Step 5: Implement regulatory change management

Set up a repeatable intake and decision trail:

• Subscriptions to regulator updates (SEC, and FINRA if relevant).
• Monthly review cadence with a log of changes.
• Impact assessment per change, with policy updates, training, and disclosure updates as needed ¹.

Artifact: Regulatory change log with status tracking ¹.

Step 6: Run and document the annual review as an effectiveness assessment

Your annual review must answer two questions:

1. Are the policies adequate for the current business?
2. Are they effective in practice, based on testing, incidents, exceptions, complaints, and change events? ¹

Build the annual review package from:

• The year’s testing results and exceptions.
• Incident and complaint logs.
• Prior exam findings and remediation status.
• Material business changes (new products, new third parties, new systems).
• Regulatory change log ¹

Deliverable: Written annual review report with findings and a corrective action plan, plus written workpapers that show how you reached conclusions ¹.

Required evidence and artifacts to retain (exam-ready list)

Examiners commonly ask for the following categories ¹:

• Annual review documentation: written reports, workpapers, presentations to senior management/board, corrective action plans, proof of remediation closure.
• CCO authority/resources: designation letter, job description, reporting line evidence, compliance budget, evidence of escalation and management responses.
• Policy update procedures: current manual, version history, approval records, training materials, Form ADV updates that reflect practice.
• Testing and monitoring: annual testing plan, testing results, exception logs, trade surveillance outputs and resolution notes, complaint log, third-party assessments if used.

A simple retention rule that works operationally: store each artifact with a date, owner, and link to the policy/control it supports.

Common exam/audit questions and hangups

Expect pointed questions like these ¹:

• “Show me your last annual review report and the workpapers behind it.”
• “What changed in your business since the last review, and what did you change in policies?”
• “How do you know your marketing review process prevents unsubstantiated claims?”
• “Walk me through one exception from detection to closure.”
• “If the CCO recommends a change and the business refuses, what happens next?”

Hangups that slow teams down:

• Annual review exists, but it is a checklist with no analysis of effectiveness ¹.
• Issues are “fixed,” but there is no closure evidence or root-cause work.
• The manual says one thing; the desk procedure does another.

Frequent implementation mistakes (and how to avoid them)

Mistake	Why it fails	Fix
Annual review reads like a calendar recap	The rule expects adequacy and effectiveness analysis 1	Use a template that forces conclusions, evidence, and corrective actions per module
Policies lag business model changes	“Reasonably designed” breaks when services change 1	Add a “new product/third party/system” intake checklist requiring CCO sign-off
CCO is a figurehead	SEC actions cite lack of authority/resources patterns 1	Put authority in writing, add escalation rights, and tie resources to firm complexity
Fixes are informal	Exams run on artifacts	Track remediation as tickets with owners, due dates, and closure evidence (Daydream works well here)
Regulatory change monitoring is ad hoc	Missed changes create silent drift	Keep a regulatory change log and reconcile it during the annual review 1

Enforcement context and risk implications

This requirement is a consistent exam focus because it is cross-cutting: a weak compliance program tends to produce repeat failures across marketing, trading, custody, and disclosures. Enforcement patterns cited for Rule 206(4)-7 include inadequate or missing annual reviews and CCO authority/resource failures ¹. The 2023 written annual review documentation focus raises the bar on what you must be able to produce during an exam ¹.

Practical 30/60/90-day execution plan

Day 0–30: Stabilize and inventory

• Build/update the business inventory and policy module map.
• Confirm CCO designation, reporting line, and access rights in writing ¹.
• Stand up an evidence repository structure (by policy module).
• Draft a testing plan that covers the highest-risk modules first.

Milestone artifact: Governance memo for CCO authority + compliance program table of contents.

Day 31–60: Implement testing, issue management, and change management

• Execute initial testing sprints (marketing, trading, code of ethics, custody-related processes based on your model).
• Create an exception log and remediation workflow with closure evidence standards.
• Launch the regulatory change log and monthly review cadence ¹.
• Start policy refresh where the business has changed.

Milestone artifact: Testing results pack + open issues register with owners.

Day 61–90: Produce exam-ready annual review structure (even mid-year)

• Build the annual review template and workpaper checklist now, even if your review date is later.
• Run a “mock annual review” over the last quarter: adequacy/effectiveness conclusions per module with evidence.
• Present key findings and resourcing needs to senior management; document decisions ¹.
• If you use Daydream, configure: control library, test schedules, issue workflows, and an “annual review” report output folder.

Milestone artifact: Written review memo (interim or annual-cycle aligned) + remediation plan.

Frequently Asked Questions

Do I need a separate annual review document, or can I keep meeting notes?

Keep a written annual review report that shows adequacy and effectiveness conclusions and the evidence reviewed ¹. Meeting notes can support it, but they rarely substitute for a structured written review with findings and corrective actions.

What does “reasonably designed” mean operationally?

Policies must match your strategies, clients, conflicts, systems, and third parties, then show they work through testing and monitoring evidence ¹. A generic manual can be “written” and still fail the design standard if it ignores how your firm actually operates.

Can the CCO be part-time or wear other hats?

The rule framework expects an administered program, and enforcement patterns flag CCOs who lack time, authority, or resources ¹. If the CCO has multiple roles, document time allocation, delegation structure, and escalation authority so administration is credible.

How do I prove my annual review assessed “effectiveness”?

Tie each policy module to testing results, exceptions, incidents, and remediation outcomes, then state whether the control worked and why ¹. Keep workpapers that show the inputs, not just the conclusions.

What evidence do examiners ask for most often?

Common requests include written annual review reports and workpapers, corrective action plans, CCO designation and reporting evidence, compliance budget/resources, policy version history, and testing/exception logs ¹.

Where does Form ADV fit in implementation?

Treat Form ADV as a dependent artifact: when policies, conflicts, or business practices change, confirm disclosures stay consistent with actual procedures and updates get documented through your change management process ¹.

Related compliance topics

• 2025 SEC Marketing Rule Examination Focus Areas
• Access and identity controls
• Access Control (AC)
• Access control and identity discipline
• Access control management

Footnotes

1. Compliance Rules v2 - sec-compliance-program

2. FINRA Rulebook; Source: Compliance Rules v2 - sec-compliance-program