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Why examiners care
What the code must cover
- A standard of business conduct reflecting the adviser's fiduciary duty.
- Compliance with applicable federal securities laws.
- Reporting requirements for personal securities transactions and holdings of access persons.
- Reporting of code violations to the CCO.
- Distribution of the code to all supervised persons and acknowledgment of receipt.
Who is an access person
An access person is any supervised person who has access to nonpublic information about client transactions or portfolio holdings, or who is involved in making securities recommendations to clients. In most firms, this includes IARs, portfolio managers, traders, and many operations and compliance staff.
Personal trading reporting
- Initial holdings report — within 10 days of becoming an access person, current as of no more than 45 days prior.
- Quarterly transaction reports — within 30 days of each quarter end.
- Annual holdings report — within 45 days of year end.
- Pre-clearance — many firms require approval before transactions in reportable securities, particularly IPOs and limited offerings.
What examiners look for
- Code that names access persons consistently with how the firm actually operates.
- Personal trading reports that match brokerage statements (firms often have access persons sign attestations confirming completeness).
- Pre-clearance enforcement — evidence that requests are reviewed and denials happen.
- Annual training, attestation, and acknowledgment that access persons have read the current code.
- Documentation of any violations, the response, and any remedial action.
How StratiFi thinks about the code of ethics
A code of ethics that exists only on paper invites findings. The discipline that holds up under examination is the operating workflow — pre-clearance requests reviewed and logged, periodic personal-trading reports reconciled against brokerage statements, annual attestations collected and stored — connecting the policy to evidence that it is followed. The code is not a binder; it is a system.
Frequently asked questions
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Are personal accounts subject to the code?
Yes. Access persons must report holdings and transactions in their personal accounts as well as in accounts of immediate family members in the same household, with limited exceptions for accounts where the access person has no influence or control. -
What's pre-clearance?
A requirement that an access person obtain CCO approval before executing certain personal trades. Pre-clearance is mandatory for IPOs and limited offerings under the rule; many firms extend it to broader categories. -
How often is code training required?
Annually at minimum, with onboarding training for new hires. Best practice includes ad-hoc training when the rules change or when violations highlight a recurring issue. -
What is a code of ethics?
A code of ethics is a written policy that sets standards for professional conduct and personal conflicts of interest. For SEC-registered investment advisers, Rule 204A-1 mandates a written code covering standards of conduct, personal securities reporting, and pre-clearance procedures. Violations must be reported to the CCO and documented in the firm's records.