Resources/ Updates

Sep03

New Form ADV Approved ~ Changes to Investment Adviser Reporting

On August 25, 2016 The SEC adopted amendments to rules impacting Form ADV Part 1A, the form used by investment advisers (“advisers”) to register and remain compliant with the rules of the SEC and their state securities authorities.  The SEC uses this collected data to conduct risk-based adviser exams and investigations and, in aggregate, to monitor industry trends. Form ADV content is also available to the public online on the Investment Adviser Public Disclosure System (IARD).

Overview of Amendments

Most of the adopted amendments will impact how advisers to private investment funds will file their initial registration and annual updating amendment reports with the SEC on Form ADV.

Amendments to Form ADV Part 1A will:

  • Require deeper reporting on separately managed accounts (“SMAs”)—pension plans, endowments, foundations, other institutional clients, and retail clients—including:
    • aggregate data related to the use of borrowings and derivatives
    • any custodian that holds 10% or more of separate account assets
    • use of an outsourced CCO
    • expanded info on branch office operations
    • social media use
    • wrap fee programs
  • Codifies uniform “umbrella” registration requirements for advisers to private funds—facilitating registration on one Form ADV multiple private fund adviser entities operating a single advisory business (“umbrella registration”).
  • Ease form use through technical changes.

In addition to the Form ADV changes, the SEC has adopted amendments to the books and records rule of the Investment Advisers Act of 1940 (“Advisers Act”).  

Amendments to Rule 204-2 will: 

  • Require advisers to maintain documentation on performance calculations or rates of return in any written communications circulated/distributed by the adviser.
  • Require advisers to maintain originals of all written communications they receive and copies of all they send related to the performance or rate of return of any or all managed accounts or securities recommendations.

Remarks from Commissioner White

“These amendments are an important step in a series of rulemakings to enhance the SEC’s monitoring and regulation of the asset management industry,” said SEC Chair Mary Jo White.  “Requiring investment advisers to report this additional information will provide investors and the Commission with a better understanding of the risk profile of each adviser and the industry as a whole.”

Key Dates

  • Effective date:  60 days after Federal Register publication
  • Compliance date:  Oct. 1, 2017

Related Documents

SEC Adopts Rules to Enhance Information Reported by Investment Advisers ~ Aug. 24, 2016

FINAL SEC RULE Amendments to Form ADV ~ Aug. 2016

SDDCO Post: New Form ADV? A Heads Up for Investment Advisers ~ May 26, 2015

Proposed Amendments to Form ADV and Investment Adviser Act Rules ~ May 2015

 

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