SEC Proposes New Rule with respect to Outsourcing by Investment Advisers
Highlights
The SEC has proposed a new rule that, if adopted, will impose new requirements on RIAs that outsource certain functions to service providers with respect to the selection, monitoring and continued engagement of such service providers
The Proposed Rule does not distinguish between affiliated service providers and unaffiliated service providers
As currently drafted, the Proposed Rule does not provide any carve-outs for service providers that are otherwise subject to Federal securities laws (e.g., SEC-registered broker-dealers and other RIAs, including sub-advisers)
Exempt reporting advisers are not subject to the Proposed Rule, but may be impacted in their capacity as sub-advisers to any investment adviser subject to the rule
On Oct. 26, 2022, the Securities and Exchange Commission (“SEC”) proposed rule 206(4)-11 (the “Proposed Rule”), a new rule under the U.S. Investment Advisers Act of 1940 (“Advisers Act”) that, if adopted in its current form, will impose new requirements on investment advisers that are required to be registered with the SEC (“RIAs”) with respect to outsourcing certain Covered Functions to Service Providers (each as defined below).
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