I’ve been talking to a lot of capital markets companies recently, and the same questions keep coming up:
When is Docs (our document management system) actually a good fit, and when might it not be necessary?
Since this seems to be top of mind for a lot of people, I wanted to outline what I’ve seen and break it down below.
Hedge Funds
When they need it
- If registered as a Registered Investment Adviser (RIA) with the Securities and Exchange Commission (SEC). Hedge funds that manage over $150 million in assets are legally required to register as RIAs. That means they must maintain a compliance program with written policies and prove that staff has acknowledged them.
- Example docs: Compliance Manual, Code of Ethics, Trade Allocation Policy, Personal Trading Policy, Insider Trading Policy, Valuation Procedures Manual, Gifts and Entertainment Policy
- If managing ERISA or pension assets. ERISA is the Employee Retirement Income Security Act, which governs pension money. Funds handling this capital need fiduciary policies and audit-ready records.
- Example docs: ERISA Fiduciary Policy, Valuation Oversight SOP, Conflicts of Interest Disclosure Policy, Investor Reporting Policy
- If running quantitative or algorithmic trading strategies. Regulators require documented governance around model development and updates.
- Example docs: Model Development SOP, Model Change Control Policy, Backtesting Standards Document, Algorithm Deployment SOP
- If cross border structures like Cayman feeders or EU domiciled entities. These trigger AML (Anti-Money Laundering), KYC (Know Your Customer), and FATCA (Foreign Account Tax Compliance Act) obligations.
- Example docs: AML Policy, KYC Onboarding SOP, FATCA Compliance Policy, Investor Due Diligence Manual
When they don’t
- Sub threshold domestic hedge funds with only high net worth individuals as LPs (limited partners), not registered as RIAs, and no institutional capital
- Example docs: A lightweight Code of Ethics, an informal valuation memo, a basic compliance checklist
Venture Capital and Private Equity Funds
When they need it
- If registered as RIAs with the SEC (over $150 million AUM). Registration triggers the requirement to maintain a compliance program with written and auditable policies.
- Example docs: Compliance Manual, Code of Ethics, Valuation Policy, Expense Allocation Policy, Insider Trading Policy, Investment Committee Charter
- If managing institutional LPs such as pensions, endowments, or sovereign wealth funds. These investors often require policy binders as part of diligence.
- Example docs: Valuation Guidelines, Conflicts of Interest Policy, ESG Policy, LP Communications Policy, Side Letter Policy
- If operating across multiple jurisdictions such as Delaware, Cayman, or EU structures. Multi-jurisdictional fundraising triggers AML, KYC, and FATCA requirements.
- Example docs: AML Policy, Investor Due Diligence SOP, FATCA Compliance Policy, Subscription Document Review SOP
- If branding as an ESG or Impact fund. ESG stands for Environmental, Social, and Governance, and funds that market themselves this way need formal ESG policies and reporting frameworks.
- Example docs: ESG Investment Policy, Responsible Investment Guidelines, Impact Measurement and Reporting SOP, Sustainability Disclosure Policy
When they don’t
- Small early stage VC funds with only angel or family office LPs, below the SEC registration threshold, and operating entirely domestically
- Example docs: LP Agreement, basic Investment Committee Charter, high level governance notes
Broker Dealers
When they need it
- Always, if registered with FINRA (the Financial Industry Regulatory Authority). FINRA Rule 3110 requires broker dealers to have Written Supervisory Procedures (WSPs) and proof that staff has acknowledged them.
- Example docs: Written Supervisory Procedures, AML Program Manual, Customer Communications Policy, Trade Surveillance Procedures, Branch Supervision SOP
- When launching new products
- Example docs: New Product Approval SOP, Suitability Review Procedures, Conflicts Clearance Policy, Product Risk Assessment Checklist
- When expanding into new jurisdictions
- Example docs: Cross Border Marketing Policy, Jurisdictional Registration SOP, Foreign Entity Approval Procedures
When they don’t
- Proprietary trading firms that do not take on customers or investor money and are not FINRA registered
- Example docs: Trading Desk Manual, Risk Guidelines
Investment Banks
When they need it
- Always, if regulated by the SEC or FINRA
- Example docs: Insider Trading Policy, Restricted List Procedures, MNPI Handling SOP (MNPI means Material Non Public Information), Employee Personal Account Dealing Policy
- For research divisions. Banks must keep policies to prove research independence and Chinese walls (information barriers between research and investment banking).
- Example docs: Research Independence Policy, Information Barriers SOP, Analyst Certification Policy, Research Distribution Guidelines
- For underwriting activities. Banks must document standards for client due diligence, conflicts management, and offering disclosures.
- Example docs: Underwriting Standards Manual, Client Due Diligence SOP, Conflicts Management Policy, Offering Disclosure Procedures
When they don’t
- Boutique advisory only firms without research divisions or underwriting functions
- Example docs: Compliance Manual, Code of Ethics
Asset Managers and Mutual Funds
When they need it
- If registered under the Investment Company Act of 1940 (often just called the 40 Act). This law governs mutual funds and public investment funds in the US and requires them to keep a compliance manual and auditable policies.
- Example docs: Compliance Manual, Liquidity Risk Management Program, NAV Pricing and Valuation SOP, Expense Allocation Policy, Recordkeeping SOP
- For SEC liquidity and valuation requirements
- Example docs: Liquidity Classification SOP, Fair Valuation Procedures, Fund Pricing Review Checklist
- For marketing and advertising activities
- Example docs: Advertising Policy, Social Media Communications Policy, Pre Approval Workflow for Marketing Materials
When they don’t
- Exempt reporting advisers under the registration threshold who only manage private funds
- Example docs: Compliance Overview, Valuation Note
Custodians and Clearing Houses
When they need it
- Always, because they are designated as systemically important financial market utilities. That means they are critical to the functioning of the financial system and always under the eye of regulators like the Fed, OCC, or ESMA.
- Example docs: Cybersecurity Policy, Operational Risk SOP, Business Continuity and Disaster Recovery Plan, Reconciliation Procedures, Access Control Policy, Incident Response SOP
- During regulatory inspections by authorities
- After operational risk events like outages or reconciliation breaks, requiring proof of documented escalation and resolution procedures
When they don’t
- Never exempt, always required to maintain governed, audit ready policies
Exchanges and ATS
When they need it
- Always, because exchanges and ATS (Alternative Trading Systems) are regulated entities. They must maintain market fairness and surveillance policies.
- Example docs: Market Surveillance SOP, Wash Trading and Market Abuse Policy, Fair Access Policy, Technology Change Management SOP, Disaster Recovery Plan, System Integrity Controls Manual
- During SEC or CFTC examinations, where acknowledgement logs and version histories must be produced
When they don’t
- Never exempt, always required to maintain governed, audit ready policies
Document Management Systems in Capital Markets
The need for governed, auditable documentation in capital markets is not uniform. The deciding factors are registration status, investor type, jurisdiction, and activities.
Mandatory users include RIAs, broker dealers, investment banks with underwriting or research, asset managers under the 40 Act, custodians, clearing houses, and exchanges. Optional adopters include smaller hedge funds, VC funds, or boutique advisory firms below thresholds, though many adopt Docs early to win institutional capital or prepare for scaling.
Docs makes every policy, procedure, and SOP not just available, but governed, versioned, acknowledged, and provable. It turns compliance from a static binder into a living, auditable system.