The SEC Form ADV amendments were adopted on August 25, 2016. These amendments will impact both SEC and state registered investment advisors.
Briefly, the amendments include: (1) requiring investment advisors to provide information related to their separately managed account (SMA) business; (2) enable private fund investment advisers to file an ‘umbrella registration’ for separate investment advisors that operate as a single investment advisory business; (3) amend Rule 204-2 under the Investment Advisers Act of 1940 to require investment advisors to maintain records that demonstrate performance calculations or rates of return in any written communications and maintain certain additional records; and (4) additional, clarifying and technical amendments to the Form ADV.
In addition to these SEC Form ADV amendments, the SEC amended the Investment Advisers Act Rules as well to create further clarification. Rule 204-2(a)(16) currently requires investment advisers to maintain records supporting performance claims in communications that are distributed or circulated to 10 or more persons. The SEC has amended this rule and now requires an investment adviser to maintain these records in communications that are distributed or circulated to “any person.”
Adjustments to Rule 204-2(a)(7) impose additional recordkeeping obligations on investment advisers to maintain original records of all written communications received and copies of all written communications sent related to the performance or rate of return of any or all managed accounts or investment recommendations. Investment advisers were previously only required to maintain records of correspondence that fall into certain categories. The SEC noted that most investment advisers already maintain the information that will be required to be maintained under amended rule 204-2, and the rule change does not require advisers to print out and retain hard copy “originals.”
The compliance timeline for the Form ADV and Advisers Act amendments and compliance with these changes is for any investment adviser filing an initial Form ADV or an amendment to an existing Form ADV on or after October 1, 2017, will be required to provide responses on the updated form. In many cases for investment advisers with a December 31 fiscal year, this will result in their first direct exposure to the new form taking place in connection with their annual Form ADV updates due at the end of March, 2018. Amendments to the Advisers Act books and records rule will apply to communications circulated or distributed after October 1, 2017. Investment Advisers that circulate or distribute communications after October 1, 2017, that includes performance information, including information on performance that predates that date, will be required to maintain the materials required by the Amendments that demonstrate the calculation of the performance.
Contact Registered Advisor Services today to learn how our annual ongoing compliance service will help you to meet these new SEC Form ADV amendments and rule changes!
