2022-23694: Outsourcing by Investment Advisers

Summary

The Securities and Exchange Commission ("Commission" or "SEC") is proposing a new rule under the Investment Advisers Act of 1940 ("Advisers Act") to prohibit registered investment advisers ("advisers") from outsourcing certain services or functions without first meeting minimum requirements. The proposed rule would require advisers to conduct due diligence prior to engaging a service provider to perform certain services or functions. It would further require advisers to periodically monitor the performance and reassess the retention of the service provider in accordance with due diligence requirements to reasonably determine that it is appropriate to continue to outsource those services or functions to that service provider. We also are proposing corresponding amendments to the investment adviser registration form to collect census-type information about the service providers defined in the proposed rule. In addition, we are proposing related amendments to the Advisers Act books and records rule, including a new provision requiring advisers that rely on a third party to make and/or keep books and records to conduct due diligence and monitoring of that third party and obtain certain reasonable assurances that the third party will meet certain standards.

The agency’s own summary, as published.

What this changes

Amends 2 parts of the Code of Federal Regulations — the standing rules this notice rewrites.

• 17 CFR 275 Rules and Regulations, Investment Advisers Act of 1940
• 17 CFR 279 Forms Prescribed Under the Investment Advisers Act of 1940