On October 26, 2022, the Securities and Exchange Commission (the “SEC”) voted 3-2 to propose new Rule 206(4)-11 under the Investment Advisers Act of 1940, which would impose due diligence and monitoring requirements on registered investment advisers that outsource certain functions to affiliated or unaffiliated service providers. The SEC is also proposing corresponding amendments to the Advisers Act books and records rule, including an amendment that would apply to advisers that rely on a third party to make and/or keep books and records, as well as amendments to Form ADV to collect census-type information about covered service providers. In the proposing release, the SEC notes that it has become concerned about the extent to which investment advisers are relying on outside service providers to perform services necessary to the provision of advisory services (defined as “covered functions” in the proposed rule). The proposed rule and related amendments are intended to address this concern by creating a consistent oversight framework for the outsourcing of such covered functions, and to address the SEC’s related concern that it has limited visibility into advisers’ outsourcing, and thus the potential extent to which advisory clients face outsourcing-related risks. The SEC is seeking comment from the public on the proposal, due on the later of 30 days after the date of publication of the proposed amendments in the Federal Register or December 27, 2022.