• SEC Proposes Amendments to Form ADV and Investment Advisers Act Rules
  • June 16, 2015 | Author: J. Andrew Gipson
  • Law Firm: Jones Walker LLP - Jackson Office
  • On May 20, 2015 the United States Securities and Exchange Commission ("SEC") released proposed rules that would amend Form ADV, the form used by investment advisers to register with the SEC (or the state, as applicable) and amending certain Investment Advisers Act Rules. The SEC's proposed rule is available at the following link: http://www.sec.gov/rules/proposed/2015/ia-4091.pdf

    The changes proposed to Form ADV include collection of detailed information about investment advisers' separately managed accounts in a way similar to information already collected regarding pooled investment vehicles. The proposals would require advisers to report the approximate percentage of separately managed account regulatory assets under management by general investment category. Additionally, advisers with at least $150 million in regulatory assets under management attributable to separately managed accounts would be required to report on the use of borrowings and derivatives in such accounts. Advisers would also be required to identify any custodians accounting for at least 10 percent of separately managed account regulatory assets under management, along with the amount of the adviser’s regulatory assets under management attributable to separately managed accounts held at the custodian. The SEC in its release opined that this data would assist in its ongoing risk monitoring initiatives.

    Other proposed changes to the Form ADV would require collection of information regarding the use of social media, social media addresses, as well as information on an adviser's other offices. As proposed, the rules would replace reporting of ranges of an adviser's number of clients and assets under management to include instead the number of clients and amount of regulatory assets under management attributable to each category of clients as of the date the adviser determines its regulatory assets under management. Finally, the proposals include amendments to Form ADV General Instructions to provide guidance to advisers who may be eligible for "umbrella registration" under a single adviser where advisers operate as a single business through multiple legal entities.

    With regard to proposed amendments to the Investment Advisers Act Rules, the amended books and records rule, if approved, would require investment advisers to maintain additional materials related to the calculation and distribution of performance information. Currently, the rules require advisers to maintain records supporting performance claims in communications that are distributed or circulated to "ten or more persons." The proposed amendment would remove the ten person limitation, imposing this requirement when distributed to "any person." The SEC's proposal would also require advisers to also maintain originals of all written communications received and copies of written communications sent by an investment adviser relating to the performance or rate of return of any or all managed accounts or securities recommendations.

    Other miscellaneous changes not discussed above were included in the SEC's proposed rules. Comments are due no later than 60 days after publication in the Federal Register.