An AI policy for an advisory firm.
Ten sections with the language, published in full. What ranks for this today is written for HR departments.
Most firms do not need a standalone AI policy. Rule 206(4)-7 already requires written policies and procedures reasonably designed to prevent violations of the Advisers Act, and AI provisions belong inside the compliance manual you maintain under it. A separate AI document tends to sit outside the annual review, which means nobody ever tests it. What follows are the ten sections that need to exist, with language for each.
The inventory comes first.
A policy written before the inventory describes a firm that does not exist. You cannot state which tools are approved until you know which are in use, and the gap between those two lists is usually the finding.
One row per tool: what it is, who approved it, what data it touches, whether the vendor trains on that data, what it produces, and whether that output is retained. The compliance page covers building it. It takes an afternoon and it determines every section below.
Ten sections, with language.
Bracketed text is a fill-in. Adopt the sections that describe how your firm actually operates, and do not adopt a rule you have no intention of supervising.
Scope and definitions
Decides what the rest of the policy reaches. Most firms scope too narrowly and exclude the vendor-embedded AI already running inside their CRM.
This policy applies to all supervised persons and to any software incorporating artificial intelligence used in the conduct of the firm's advisory business, whether licensed by the firm, embedded in another product the firm uses, or accessed by a supervised person on any device.
Approved tools and the approval process
The section an examiner opens first, because it is the one that produces a list.
Only tools listed on the firm's AI Tool Inventory may be used in the conduct of advisory business. A supervised person seeking to use a tool not on the inventory must submit a request to [role] and receive written approval before use. The inventory is maintained by [role] and reviewed no less than [frequency].
Data handling
The rule people actually break, usually by pasting something into a consumer tier tool. Name the categories rather than saying be careful.
Client personally identifiable information, account numbers, Social Security numbers, tax returns, account statements and any non-public personal information as defined under Regulation S-P may not be entered into any tool that is not on the approved inventory. Where an approved tool is used with such information, only the firm's licensed business tier may be used. Consumer or free tiers of any tool are prohibited for firm business.
Human review
The provision that does the most work in an examination, because it is the one that puts a name against an output.
No output produced with the assistance of an AI tool may be delivered to a client, filed, or relied upon in forming a recommendation until it has been reviewed by a supervised person competent to evaluate it. The reviewer is responsible for the content of the output as though they had prepared it.
Recordkeeping
Rule 204-2 does not care what produced a record. Decide at the category level in advance, not per document.
Records created or assisted by an AI tool are subject to the firm's retention schedule on the same terms as any other record of the same type. [Role] determines the record category for each class of AI-assisted output, and that determination is documented on the inventory. Where a tool produces both a transcript and a summary, the firm retains [state which, and why].
Client disclosure and consent
Two separate obligations that firms routinely merge. One is a Form ADV question; the other is state law.
[Role] determines whether a tool's use is material to the advisory relationship and therefore requires disclosure in Form ADV Part 2A. Separately, no client meeting may be recorded or transcribed without the consent of every participant, obtained at the time of the meeting and in accordance with the law of each applicable jurisdiction.
Vendor diligence
Third-party risk is the frame examiners already have. The answers belong in a file, not a memory.
Before a tool is approved, [role] obtains and documents the vendor's answers on: whether firm or client data is used to train its models, the identity of its subprocessors, whether zero retention is available and configured, what the integration is permitted to write as well as read, what happens to firm data on termination, what its audit trail contains, and its written commitment to notify the firm of a breach involving customer information within 72 hours, as Regulation S-P requires of service providers. This documentation is retained for the life of the relationship and [period] thereafter.
Training and attestation
A training record nobody can produce is decoration. The attestation is what makes it evidence.
All supervised persons receive training on this policy upon adoption, upon hire, and no less than annually. Each supervised person attests in writing that they have read and will comply with it. [Role] retains the training and attestation records.
Incident reporting
The provision that turns a bad afternoon into a documented response rather than a discovery two years later.
A supervised person who becomes aware that client information has been entered into an unapproved tool, that an AI-assisted output containing a material error has reached a client, or that a tool has behaved outside its approved use, must report it to [role] immediately. [Role] documents the incident, the remediation and any required notification.
Review and update
Ties the policy to Rule 206(4)-7, which is the whole reason it is enforceable rather than advisory.
This policy is reviewed as part of the firm's annual review under Rule 206(4)-7. The review tests whether the artifacts required by this policy exist, not merely whether the policy remains current.
Two things that do not belong in it.
Capability language. Descriptions of what the firm's AI does for clients belong in Form ADV, not here, and they create a misstatement wherever they overstate. In March 2024 the SEC settled charges against two advisers for exactly that, with penalties of $225,000 and $175,000. The Form ADV page has the disclosure language.
Rules you will not enforce. A policy prohibiting a tool that half the firm uses daily is worse than having no policy. It documents that the firm knew the rule and did not supervise it, which converts a training problem into a supervision failure. If a prohibition is not going to be checked by someone, either assign the someone or drop the prohibition.
Your AI vendors are service providers now.
The SEC amended Regulation S-P in May 2024 (Release No. 34-100155). Larger entities had to comply by December 3, 2025 and smaller entities by June 3, 2026. For an investment adviser, larger means $1.5 billion or more in assets under management, and a firm below that line had until June 3, 2026. Both dates have passed, so every covered firm is expected to comply today.
The part that reaches AI is the service provider rule in 17 CFR 248.30. Any vendor that receives customer information is a service provider, and that includes a notetaker recording client meetings, a CRM assistant reading client records and a chatbot a staff member pastes a client email into. The firm needs written policies and procedures to oversee each one, including a requirement that the vendor notify the firm as soon as possible, and no later than 72 hours, after becoming aware of a breach that touches customer information. The firm also needs an incident response program, and customers whose sensitive information was, or is reasonably likely to have been, accessed without authorization must be notified no later than 30 days after the firm becomes aware of it.
That is why the policy above starts from an inventory of tools and requires vendor diligence before anything is approved. A firm that cannot list which vendors hold client information cannot show that each one is being overseen.
This is not behind a form.
Every competitor for this puts the template behind a lead capture, which is why the ones that rank are written for HR departments — a gated PDF cannot rank for a searcher who wants the document, so the pages that do rank are the ones with nothing to protect.
The people who hire an implementation consultancy are not stopped by a form. They are stopped by not being able to judge whether the firm knows anything. So the artifact is on the page.
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Sources and standing.
Advisers Act Rule 206(4)-7 requires written policies and procedures reasonably designed to prevent violations of the Act, a designated chief compliance officer, and an annual review. Retention obligations sit in Rule 204-2. Regulation S-P governs the non-public personal information named in the data handling section. Last reviewed at source: September 2026.
- 17 CFR 275.206(4)-7, Compliance procedures and practices (checked 2026-10-27)
- 17 CFR 275.204-2, Books and records to be maintained by investment advisers (checked 2026-10-27)
- 17 CFR Part 248, Subpart A, Regulation S-P (checked 2026-10-27)
The language above is a drafting starting point, not an adopted policy, and it needs your facts and your compliance counsel before it goes into a manual. This is not legal advice. If something here is wrong, tell me and it gets corrected.
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