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News January 17, 2005 Issue

Be Careful of Off-the-Shelf Manuals

Think twice before relying on someone else’s procedures.

"Many advisers may be tempted to adopt so-called ‘off the shelf’ compliance manuals or codes of ethics as their own," said SEC Division of Investment Management director Paul Roye last week at the Managed Funds Association’s hedge fund conference. This, he said, "can be a dangerous practice."

Roye said that the "one size fits all" approach "often does not work when it comes to compliance matters," noting that compliance policies and procedures are most effective when they are tailored to the specifics of the adviser. Moreover, Roye noted that advisers that adopt generic compliance policies and procedures may "unwittingly sign on to a particular policy or procedure that they are not prepared to implement, and sometimes not even aware that they have obliged themselves to implement."