An integral aspect of a robust compliance program is a forensic testing plan designed to evaluate whether an adviser’s employees are adhering to policies and procedures adopted by the adviser. Thus, once a fund manager has defined the parameters that will govern how its investment personnel may interact with executives at publicly traded companies – a practice frequently referred to as “corporate access” – the next step is to periodically assess whether its employees are operating within those boundaries and following the adviser’s procedures. This final article in our three-part series analyzes several testing mechanisms that managers can use to ensure compliance with their policies governing corporate access, as well as the SEC’s expectations regarding an adviser’s oversight, controls and procedures related to communications with executives at publicly traded companies. The first article
provided an overview of the context in which meetings between fund managers and issuers arise; the goals of corporate access; the ways brokers are compensated for facilitating these meetings; and two key legal risks presented by this practice. The second article
discussed how advisers can design policies to minimize the risks associated with these meetings, as well as six front-end controls that advisers should consider adopting. See our two-part series discussing the results of a survey on compliance testing: “Fees and Expenses, Investment Mandates, Big Data and Custody
” (Aug. 2, 2018); and “Best Execution, Soft Dollars, Advertising, Individual Clients and Cryptocurrency Trading
” (Aug. 9, 2018).