Rule 206(4)‑7 under the Investment Advisers Act of 1940 generally requires registered fund managers and other registered investment advisers to evaluate, at least annually, the adequacy of their compliance policies and procedures and the effectiveness of their implementation. Therefore, it is imperative for fund managers to thoughtfully consider how to approach the annual compliance review process with the goal of mitigating weaknesses in their compliance programs. Although there is scant regulatory guidance on how to prepare for, conduct and document an annual compliance review, considerable customs and practices have developed over time. Fund managers who familiarize themselves with best practices – or who retain and closely monitor service providers conversant with best practices – can reconcile the competing goals of such a review: to communicate to the SEC that they take their compliance obligations seriously without revealing all their compliance weaknesses. This first article in a two-part series describes the framework of an annual compliance review; how to prepare for the annual compliance review; and who should conduct the annual compliance review. The second article will discuss when the annual compliance review should be conducted; the annual compliance review process; ways to document the annual compliance review; and common challenges and mistakes made by fund managers when conducting the review. See our two-part series “A Checklist for Investment Advisers to Streamline and Organize Their Annual Compliance Program Reviews”: Part One (May 12, 2020); and Part Two (May 26, 2020).