“Living Wills” for Private Fund Sponsors? Proposed Rule Requiring Investment Adviser Business Continuity and Transition Plans

13 July 2016
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Key takeaways

  • On June 28, the SEC proposed a new rule under the Investment Advisers Act of 1940 that would require SEC-registered investment advisers to adopt and implement written business continuity and transition plans reasonably designed to address operational and other risks related to a significant disruption in the adviser’s operations.
  • Most advisers currently have business continuity plans that are designed to address business disruptions. The proposed rule would also require these plans to address transition issues – that is, situations where the adviser exits the market and thus is no longer able to serve its clients.
  • Private fund managers and other advisers should review their existing business continuity plans to determine whether they address the issues raised by the SEC in the release, as well as begin to develop the types of transition plans that would be required by the proposed rule.