Archive / Investment Adviser (Level 1) / Ethical Issues
nism-series-xa-sec-code-ethics-quarterly-reporting[ INVESTMENT ADVISER (LEVEL 1) ]
As per the SEC's Code of Ethics requirements for US registered investment advisers discussed as a global best practice, how frequently must an adviser's 'access persons' report their personal securities transactions in reportable securities to the adviser's Chief Compliance Officer (CCO)?
[ A ]At least once every quarter, in addition to reporting their securities holdings when they become an access person and at least annually thereafter[ CORRECT ]
[ B ]Only once, at the time they are first designated as an access person
[ C ]Only when a violation of the code of ethics is suspected by the compliance officer
[ D ]Once annually, combined with the holdings report, with no separate transaction-level reporting
Takeaway
Option A is correct: access persons must report personal securities transactions in reportable securities to the CCO at least quarterly, separate from the annual/at-designation holdings report.
Derivation
Section 19.8.1 ('Securities and Exchange Commission US') lists the minimum contents of an SEC-mandated code of ethics, including the requirement that access persons report their securities holdings at the time they become an access person and at least annually thereafter, and separately make a report at least once quarterly of all personal securities transactions in reportable securities to the CCO or other designated person. A common error is merging the holdings and transaction reporting cycles into one annual requirement.
Why the others fail
B — Only once, at the time they are first designated as an access person
The SEC requirement is ongoing: holdings are reported on becoming an access person and at least annually thereafter, and transactions must be reported at least quarterly, not just once.
C — Only when a violation of the code of ethics is suspected by the compliance officer
Reporting of personal securities transactions is a routine, periodic requirement (at least quarterly) for all access persons, not something triggered only by suspected violations.
D — Once annually, combined with the holdings report, with no separate transaction-level reporting
The workbook distinguishes holdings reporting (at designation and annually) from transaction reporting, which must be made at least quarterly, a shorter and separate cycle.