SEC Issues More Guidance on Certain Form ADV Amendments


In August 2017, The SEC’s Division of Investment Management issued an information update, for Advisers Filing Certain Form ADV Amendments.  Specifically, the update provides guidance on certain aspects of compliance with the rulemaking Form ADV and Investment Advisers Act Rules (Advisers Act Release No. 4509), previously adopted on August 25, 2016, with a compliance date of October 1, 2017.

As background, the rule requires, among other actions, that advisers provide specific information about separately managed accounts (“SMAs”.) On an annual basis, investment advisers will need to provide the amount of regulatory SMA assets under their management and the percentage of these assets in broad asset categories, including exchange-traded equities, U.S. government and agency bonds, securities issued by investment companies, and derivatives. The purpose of the changes is to have advisers provide a level of information for SMAs comparable to that currently provided for pooled investment vehicles.

Fortunately, the majority of advisers will not need to take action until they submit their annual updating amendments to Form ADV Part 1 and/or Part 2.  However, some advisers may need to file an interim amendment to Form ADV Part 1 or Part 2 on or after October 1, 2017, but prior to the date on of their next annual amended Form ADV, such as when a filer is required to obtain a new private fund identification number or update a Form ADV Part 2A brochure on the Investment Adviser Registration Depository (“IARD”) system.

In some cases, these firms will not have enough data to provide the required additional information on the type of assets held (Schedule D, Section 5.K. (1)), and the use of derivatives and borrowing (Items 5.K.(2) because the firm’s books and records have not yet captured the newly required information.

In those cases, according to the information update, the filer needs to enter a “0” as a placeholder in the relevant sections of the ADV, and provide a note in the Miscellaneous section of Schedule D stating that a placeholder of “0” was entered on the ADV, in which case the SEC staff will not recommend enforcement action under Section 207 of the Investment Advisers Act of 1940.

 

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