Year-End Compliance Review: Does Your Compliance Program Reflect the Year You Actually Had? | Part 1 of 3
As we approach year-end, it's an ideal time for investment advisers to evaluate whether their compliance programs reflect how their firms actually operated throughout the year. In our three-part Year-End Compliance Review Series, we'll explore practical ways to close the year with greater clarity and confidence. In this, Part 1, we'll examine whether your policies and procedures align with your firm's daily operations. Part 2 will focus on addressing documentation gaps, supervisory evidence, and unresolved compliance matters. Finally, Part 3 will bring everything together by exploring how to turn year-end review findings into practical priorities for the next compliance cycle. Together, these articles offer a thoughtful approach to strengthening your compliance program without creating unnecessary complexity.
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As the year draws to a close, investment advisers naturally begin thinking about what comes next. Registration renewals, upcoming filings, business planning, and client priorities all compete for attention.
But before looking ahead, there is one important question worth asking:
Does your compliance program reflect how your firm actually operated this year?
For many independent RIAs, changes happen gradually. A new service is introduced, responsibilities shift, or a temporary process becomes part of everyday operations.
Individually, these changes may seem minor. Collectively, they can create a gap between what a firm's compliance documents say and what actually happens.
That's where a thoughtful year-end review becomes valuable.
Why Year-End Is More Than a Calendar Date
A year-end compliance review provides an opportunity to evaluate whether your firm's policies, procedures, disclosures, and supervisory activities remain consistent with its business.
For SEC-registered advisers, Rule 206(4)-7 requires reviewing the adequacy of compliance policies and procedures and the effectiveness of their implementation at least annually.[1]
State-registered advisers should also consider their applicable state requirements, which may differ.
Importantly, the annual compliance review does not have to occur at calendar year-end. But for firms that use this period to evaluate operations and plan for the next year, it can be a natural opportunity to assess whether everything remains aligned.
The goal isn't simply to confirm that policies exist. It's to determine whether they still work.
When Everyday Changes Create Compliance Gaps
Consider how your firm's operations may have evolved over the past twelve months.
Perhaps you've changed technology providers, adjusted your fee billing process, introduced a new service, or delegated responsibilities differently.
Were the corresponding policies and procedures updated?
And just as importantly, can your firm demonstrate that its supervisory activities occurred as intended?
These questions are especially relevant following the SEC Division of Examinations' September 2026 Risk Alert addressing investment adviser annual compliance reviews.[2]
Among its observations, SEC staff identified reviews that failed to recognize differences between advisers' written policies and their actual business practices.
This highlights a practical concern:
A policy may be well written, but if it no longer describes how your firm operates, it may not provide the protection you expect.
A Practical Way to Evaluate Alignment
A meaningful year-end review doesn't necessarily require rewriting your entire compliance manual.
Instead, begin by identifying where the firm's business, documentation, and oversight may have moved in different directions.
Consider:
Operations: Have services, workflows, or responsibilities changed?
Documentation: Do policies, disclosures, and records accurately reflect those changes?
Supervision:
Can the firm demonstrate that required reviews and monitoring activities occurred?
Outstanding matters: Were identified issues resolved, documented, or assigned appropriate follow-up?
The objective is not to create an unnecessarily complicated process. It's to identify what is working, what requires attention, and what should be prioritized.
For smaller RIAs, this approach can make the review more manageable without losing sight of regulatory expectations.
Closing the Gap Before Moving Forward
One of the most common challenges in compliance is allowing small inconsistencies to continue simply because daily business demands take priority.
A temporary workaround becomes routine. A responsibility changes without a corresponding policy update. An identified issue remains open longer than intended.
Over time, these small differences can make it harder to demonstrate that the firm's compliance program is being implemented effectively.
A structured review gives advisers an opportunity to address those differences thoughtfully and document the decisions made.
It also creates a clearer starting point for the next compliance cycle.
Start with Clarity, Not Perfection
A strong compliance program is not one that never encounters challenges. It is one that recognizes changes, evaluates risks, and makes reasonable adjustments as the business evolves.
As you approach year-end, focus on understanding the program you have today rather than simply reviewing the documents you started the year with.
Because closing the year well isn't about checking another box.
It's about ensuring your compliance program reflects the business you're actually running.
For additional guidance, visit our Year-End Compliance Review Resource Center.
Coming next in Part 2: What Should Be Resolved Before Year-End? We'll explore how firms can approach documentation gaps, unresolved issues, and supervisory follow-up without creating unnecessary complexity.
Corrie Scoby
Chief Consultant & Owner, Three Lumos Consulting, LLC
We guide RIAs with clarity, integrity, and partnership—so you can spend less time on compliance and more time serving clients.
Note: This article provides general information and does not constitute advice. Consult your compliance team for guidance specific to your firm.
Sources
[1] Securities and Exchange Commission. Compliance Programs of Investment Companies and Investment Advisers. Rule 206(4)-7.
[2] SEC Division of Examinations. Examinations Observations Regarding Investment Adviser Annual Compliance Reviews. September 14, 2026.
