For firms with a December 31 fiscal year end, which describes the majority of investment advisers, this means compliance with respect to Form ADV updates no later than the annual amendment filing in March 2018. The most noteworthy requirements of the Amendments are described below in more detail: 1) Increased Disclosure of Separately Managed Accounts ("SMAs") While the SEC declined to specifically define “separately managed account” in the Adopting Release, for purposes of Form ADV, the SEC deems SMAs to be advisory accounts other than those that are pooled investment vehicles, including (i) investment companies; (ii) business development companies; and (iii) other pooled investments vehicles (such as private funds).Prior to the effectiveness of the Amendments, Part 1A of Form ADV only required investment advisers to disclose minimal information about their SMAs in Item 5 (e.g., percentage of clients and regulatory assets under management that represent SMAs). state and local bonds; sovereign bonds; corporate bonds – investment grade; corporate bonds – non-investment grade; derivatives; securities issued by registered investment companies and business development companies; securities issued by other pooled investment vehicles; cash and cash equivalents; and "other".Investment advisers with less than billion in RAUM attributable to SMAs will be required to report this information only as of year-end.The Amendments require investment advisers with at least 0 million in RAUM attributable to SMAs to report information in Item 5.The Amendments also require investment advisers to maintain communications relating to the performance or rate of return of any or all managed accounts or securities recommendations; this requires originals of all communications received and sent relating to the performance of managed accounts or securities recommendations to be maintained.The Amendments effectively expand Rule 204-2(a)(7) of the Advisers Act, which previously only required certain categories of written communications to be maintained.The Amendments require increased information concerning SMAs by adding specific questions in Item 5 of Form ADV with respect to (a) the type of asset(s) held by the SMAs; (b) the use of derivatives and borrowing; and (c) the role of custodians. The SEC declined to provide definitions of these terms in Form ADV and instead, permits investment advisers to use their own methodologies in determining appropriate asset categories.The amount of information requested varies based upon an investment adviser’s total regulatory assets under management (“ The Amendments require investment advisers to report the approximate percentage of their SMA assets invested in twelve broad asset categories: exchange-traded equity securities; non-exchange traded equity securities; U. Investment advisers with at least billion in RAUM attributable to SMAs will be required to report this information as of two dates per year (mid-year and year-end).
More specifically, the Amendments modify the requirements under Part 1A of Form ADV to require (among other things), (1) additional reporting requirements with respect to separately managed accounts; (2) registration on a single Form ADV of multiple private fund advisers operating as a single advisory business in a “relying adviser” structure (“”); (3) additional disclosures about investment advisers and their businesses; and (4) certain clarifying and technical changes.
Schedule R must be filed for each Relying Adviser and would consolidate in one location important information about each Relying Adviser, including identifying information (Section 1); the basis for SEC registration (Section 2); form of organization (Section 3); and control persons and information regarding the Relying Adviser’s owners and executive officers (Section 4).
Additionally, a Filing Adviser must distinguish whether it or any of its Relying Advisers manage or sponsor the private funds that are reported in Section 7. The Amendments revise the instructions to Form ADV to clarify that all information in Form ADV should be answered on behalf of the Filing Adviser and each Relying Adviser, unless otherwise indicated. However, the Adopting Release clarified that neither of (i) an investment adviser’s employees’ social media accounts, nor (ii) the social media account of an investment adviser’s unregistered affiliate that is used solely to promote the business of such affiliate, are required to be disclosed. F, which previously requested general information about an adviser’s principal office and place of business, now requires advisers to provide the total number of offices in which they conduct business as well as information about their 25 largest offices, based on the number of personnel.
Additionally, the Amendments include a revision to Rule 204-2 of the Advisers Act (relating to recordkeeping), requiring investment advisers to maintain additional records of performance calculations and performance-related communications.
The Amendments will be effective 60 days after publication in the Federal Register, and investment advisers will need to comply with the Amendments on October 1, 2017.