The SEC routinely takes advisers to task for failing to have written policies and procedures for actions such as allocating trading costs or fees and expenses, although merely having those policies and procedures is insufficient. Advisers must also ensure that their policies and procedures do not conflict with the terms of individual client agreements, and advisers must actually implement and comply with those policies and procedures. In a recent enforcement action, the SEC asserted that, although an investment adviser had disclosed its written policy for allocating trading costs, it failed to follow that policy when it conflicted with restrictions specified in individual clients’ investment management agreements. As a result, the SEC claimed that the adviser violated Rule 206(4)‑7, the so-called “compliance rule.” Any hedge fund adviser that allocates trades across multiple funds or separately managed accounts could easily face the same issues as the adviser in this action. Moreover, the general lessons on the interplay between an adviser’s policies and procedures and investor agreements are applicable to all hedge fund advisers. This article summarizes how the adviser’s failure to craft policies and procedures that took into account restrictions and requirements in individual clients’ agreements and to comply with its own specified practices resulted in the violation alleged in the settlement order. See “Best Practices for Hedge Fund Managers to Mitigate the Conflicts Arising From Managed Accounts: Dealing With Trade and Expense Allocations (Part Three of Three)” (Aug. 1, 2019); “SEC Fines Fund Manager for Failing to Equitably Allocate Fees and Expenses to Its Affiliate Funds and Co‑Investors” (Jun. 6, 2019); and “Proper Disclosure of Fee and Expense Allocations Is Crucial for Managers to Avoid SEC Enforcement Action” (Sep. 1, 2016).