Registered investment advisers are required by Rule 206(4)‑7 under the Investment Advisers Act of 1940 to conduct annual reviews of the adequacy of their compliance policies and procedures, as well as the effectiveness of the compliance program’s implementation. The SEC has focused on the annual compliance program review requirement in its examinations and enforcement actions. Rule 206(4)‑7 does not specify when an investment adviser should conduct its annual compliance review. Throughout the industry, however, advisers often perform that review in conjunction with other year-end review processes. For instance, advisers with fiscal years that track the calendar year may choose to conduct the annual compliance review now while their annual financial audits are being done. This two-part series is designed to function as a checklist that investment advisers can use to streamline and organize their annual compliance reviews. The first article analyzes Rule 206(4)‑7 and sources of guidance on complying with the rule; spells out who should be involved in conducting an investment adviser’s annual compliance program review, what information should be gathered for review and what areas should be covered; and notes the questions that SEC examiners are likely to ask about an adviser’s annual review during an examination. The second article provides a non-exhaustive list of questions to be answered for each substantive area covered during an adviser’s annual compliance program review. See our two-part series “How Hedge Fund Managers Should Approach Preparing for, Conducting and Documenting the Annual Compliance Review”: Part One (Mar. 22, 2012); and Part Two (Mar. 29, 2012).