On October 26, 2022, the SEC proposed new rules under the Investment Advisers Act of 1940 (Advisers Act) (Proposal) to prohibit investment advisers from outsourcing certain services and functions unless they take steps to reduce the risk of disruptions and failures that could harm investors. The Proposal would require advisers to conduct due diligence before engaging a service provider to perform “covered functions” and to periodically monitor that performance. In furtherance of those goals, the Proposal includes amendments to Form ADV to collect census-type information about service providers, as well as related amendments to the books and records rule under the Advisers Act. In light of the Proposal being published in the Federal Register on November 16, 2022, the comment period will end on December 27, 2022. This first article in a two-part series outlines how key defined terms dictate the scope of the Proposal; the diligence, monitoring and recordkeeping requirements imposed on fund managers; and the anticipated compliance period. The second article will describe the response of SEC commissioners and the private funds industry to the Proposal, including concerns about its purpose, overbreadth and unintended consequences. For coverage of the SEC’s recently proposed private fund rules, see our three-part series: “Overview of the Proposal and the Importance of Industry Comments” (May 24, 2022); “General Observations” (May 31, 2022); and “Rule-Specific Concerns and Next Steps” (Jun. 7, 2022).