Rule 206(4)‑7 under the Investment Advisers Act of 1940 (Advisers Act) – the so‑called “compliance rule” – requires investment advisers to, among other things, adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and the SEC’s rules. In other words, fund managers must have compliance programs. Moreover, those compliance programs must be specifically tailored to a manager’s business, including its strategy, structure and specific practices. Failing to customize the compliance program, such as by simply adopting an off-the-shelf program or manual, can result in deficiency letters and enforcement actions from regulators, as well as lost allocations from investors. This three-part series delves into the logistics of tailoring a fund manager’s compliance program. This first article outlines the expectations of the SEC, DOJ and investors as to the customization of compliance programs, as well as the consequences of failing to tailor those programs. The second article will lay out what fund managers should consider when tailoring their programs, including the role of off-the-shelf programs. The third article will identify five triggers for a review – and possible update – of a manager’s compliance program. See our two-part series on why fund managers must adequately support CCOs and compliance programs: “Recent Failures Lead to SEC Enforcement Action” (May 9, 2019); and “Six Valuable Lessons From Recent Enforcement Actions” (May 16, 2019).