The Shadow Chain: You Hire One Vendor But You Get All Their Mistakes
Written by Team WEBDYNASTY We often think our responsibility ends where our contract ends. In compliance, that is no longer true. Think of it like this. You hire a fund admin you trust. That fund admin stores your client data on a cloud service. That cloud service uses another company to fix problems. You never met that last company. You never signed anything with them. But if they make a mistake, regulators will come to you. That hidden line of companies is called the shadow chain. And now regulators are very clear that you must manage it. What changed For many years, the rule was simple. Have a written policy and check it once a year. That was Advisers Act Rule 206 4 7. Most firms thought a vendor form at the start was enough. Now three regulators have made it stricter. First, the SEC. In May 2024 it updated Regulation S P for the first time since 2000. Now every covered firm needs a written plan for how to respond to a breach. Your vendor must tell you within 72 hours if...
