'40 Act Compliance CONSULTING

BOOKS AND RECORDS

Effective October 1, 2017, registered advisers are required to comply with new disclosure on Form ADV and recordkeeping under amended Rule 204-2 (see page 87). Advisers are required to retain records of performance calculations or rate of return, or securities recommendations provided to any person. Prior to the amendment, advisers were required to retain supporting records of performance calculations only if such information was distributed to 10 or more people. The rule has also been expanded to require that all communications, including e-mails, by the adviser and its associates related to performance and securities recommendations be maintained in the adviser's recordkeeping and backup record retention systems. Rule 204-2 generally requires a registered investment adviser to keep records for a period of two years on site and for a period of six years total in an easily accessible place. Records may be preserved electronically, so long as records are indexed in a way that permits easy access and retrieval and duplicate records are stored separately either in hard copy or electronically. Advisers must be able to promptly provide the SEC with legible copies of records in the format in which they are stored and the means to access, view and print such records. It is not uncommon for the SEC to note a deficiency in the adviser's compliance with the books and records rule. An adviser should include in its testing a review of each policy's record retention obligations and correct any deficiencies identified. It is important to remember that all records of a registered investment adviser are subject to inspection by the SEC.