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SEC Amendments to Form ADV Effective on October 1, 2017

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The SEC amendments to Part 1A of the Form ADV, adopted in August 2016, will take effect on October 1, 2017.[1] The amendments require additional disclosures about a variety of topics including: separately managed accounts, chief compliance officers, an adviser’s use of social media, branch office information and umbrella registration. The additional disclosures required in the amended Form ADV are intended to assist the SEC in conducting examinations and to provide enhanced disclosure to prospective investors about an adviser’s business.[2] The amendments will not impact registered investment advisers until they make their annual amendments in the beginning of 2018. Investment advisers currently registered with the SEC should start gathering the relevant information. Additionally, advisers in the process of registering with the SEC should be aware of the recent changes to the Form ADV.

Separately Managed Accounts

The amended Form ADV requires investment advisers to disclose additional information about their separately managed accounts (i.e., any account other than a pooled investment vehicle).[3] The requested information is intended to parallel the information required in the Form PF for private funds. With respect to separately managed accounts, investment advisers must disclose their regulatory assets under management (“RAUM”) attributable to separately managed accounts across a range of asset categories, such as equity securities, government bonds, derivatives and securities issued by pooled investment vehicles. For assets that can be classified in more than one category, advisers are to use their discretion provided they apply methodologies in categorizing assets consistent with their internal policies. Advisers with $10 billion or more in RAUM must report percentages attributable to each asset class at both mid-year and year-end, while investment advisers with less than $10 billion RAUM must report such percentages only at the end of each year.

Investment advisers must report the percentage of assets attributable to borrowings and derivatives in each of their separately managed accounts. Advisers with at least $500 million of RAUM attributable to such accounts must report information concerning the number of accounts and average borrowings corresponding to ranges of net asset values and gross notional exposures each year.[4] Investment advisers are not required to report on any individual accounts of less than $10 million.

Any adviser that has at least 10% of its RAUM with a custodian must disclose the identity of the custodian and the percentage of RAUM in the separately managed account attributable to each custodian.

Sub-advisers of separately managed accounts should only report information with respect to the portion of the account that they sub-advise.

Advisers with their principal office and place of business outside of the U.S. must disclose information regarding their separately managed accounts with respect to all of their clients, including those who are not U.S. persons.

Umbrella Registration

The amendments to the Form ADV codify the recently adopted SEC rules and regulations for umbrella registration. Umbrella registration refers to the registration of an investment adviser (the “Filing Adviser”) and one or more affiliated advisory entities (each, a “Relying Adviser”) who conduct a single private fund advisory business. Umbrella registration allows a Relying Adviser, who would be eligible to register with the SEC on its own, to register under the Filing Adviser’s Form ADV. While umbrella registration is not required, it can significantly reduce the reporting obligations of Relying Advisers that would otherwise have to file a separate Form ADV. The conditions for umbrella registration are set forth below:

  • The Filing Adviser and each Relying Adviser advise either (i) private funds or (ii) both private funds and separately managed accounts for clients that
  1. are qualified clients,[5]
  2. are eligible to invest in the private funds advised by the Filing Adviser or a Relying Adviser and
  3. whose separate accounts pursue investment objectives and strategies that are substantially similar or otherwise related to those of the private funds.
  • The Filing Adviser has its principal office and place of business in the U.S. and all of the substantive provisions of the Investment Advisers Act of 1940 (the “Advisers Act”) apply to the Filing Adviser and each Relying Adviser.[6]
  • Each Relying Adviser and its employees are subject to the Filing Adviser’s supervision and control, as such that they are “associated” with the Filing Advisers.[7]
  • Both Filing Adviser and the Relying Adviser are subject to examination by the SEC.
  • Filing and Relying Advisers share the same code of ethics and written policies and procedures as required by Rules 204A-1 and 206(4)-(7) of the Advisers Act, respectively.

The Filing Adviser is required to file and update a single Form ADV that includes all necessary information about the Filing Adviser and each Relying Adviser. The amendments clarify which questions in the Form ADV need to be answered solely with respect to the Filing Adviser and those that need to be answered with respect to the Filing Adviser and its Relying Advisers. The amended Form ADV includes Schedule R, which requires disclosure of the identifying and ownership information of each Relying Adviser and its eligibility for SEC registration.

Additional Disclosures

Social Media. The amended Form ADV requires investment advisers, in addition to reporting their websites, report their social media accounts on all relevant platforms. The SEC cited examples of social media platforms (e.g. LinkedIn, Twitter and Facebook) but did not provide a formal definition. Any social media account that is used to promote an adviser’s business must be reported on its Form ADV.

Office Locations. The Form ADV currently requires an investment adviser to disclose information about its principal office and place of business and each of its five largest offices. The amendments require reporting of an adviser’s twenty-five largest offices (measured by number of employees at each location), as well as the number of employees at each location performing investment advisory functions and the types of investment advisory business conducted at such office.

Chief Compliance Officer. Rule 206(4)-7 of the Advisers Act requires all investment advisers registered with the SEC appoint a chief compliance office (“CCO”) responsible for administering its compliance policies and procedures. The amended Form ADV requires investment advisers to disclose whether they utilize an outsourced CCO.

Client Information. Investment advisers will be required to provide further information regarding the number and type of clients they advise, including those clients for which the adviser provides advisory services but do not have any RAUM. RAUM attributable to non-U.S. clients must be disclosed as well.

Wrap Fee Programs. Investment advisers that charge wrap fees will be subject to additional disclosures in the Form ADV, including the RAUM attributable to such programs and each sponsor of wrap fee programs for which the adviser serves as portfolio manager.

Proprietary Assets. Investment advisers with more than $1 billion in assets (note: this includes all assets as opposed to RAUM) will be required to report such assets within one of three ranges: (i) $1 billion to less than $10 billion; (ii) $10 billion to less than $50 billion; and (iii) $50 billion or more. This is intended to assist the SEC in its implementation of the incentive compensation rule under Dodd-Frank which if adopted, would require investment advisers with over $1 billion in assets to maintain certain records with respect to its incentive compensation arrangements and prohibit them from charging excessive incentive compensation or incentive compensation that could lead to a material financial loss.

3(c)(1) Funds. Disclosures with respect to an investment adviser’s 3(c)(1) funds will include whether sales of the fund’s interests are limited to qualified clients.

Amendments to Advisers Act Books and Records Rule

In addition to its amendments to the Form ADV, the SEC has amended the Advisers Act books and records rules as follows:

  1. the amended Rule 204-2(a)(16) requires advisers to maintain records and information related to the calculation of performance information with respect to all communications, regardless of the number of persons who have received the materials (the previous rule required the maintenance of records and information related to the calculation of performance information with respect to communications sent to ten or more persons) and
  2. the amended Rule 203-2(a)(7) requires investment advisers to maintain originals of all written communications received and copies of written communications sent relating to the performance or rate of return regarding any managed account or securities recommendation of the adviser.

As with the Form ADV, the amendments to the Advisers Act rules take effect on October 1, 2017.

* * *

For more information or if you have any questions regarding the topic discussed above, please contact the attorney with whom you work regularly or any of the following in our Financial Services, Private Funds and Capital Markets practice group:

Michael G. Tannenbaum

(212) 508-6701


Wayne H. Davis

(212) 508-6705


Michele Gibbs Itri

(212) 508-6732


Beth Smigel

(212) 702-3176


Emma Brady

(212) 508-6775


Daniel Altabef

(212) 508-6782


BulletPoint® is a newsletter of Tannenbaum Helpern Syracuse and Hirschtritt LLP’s Financial Services, Private Funds and Capital Markets Department. It is an alert covering recent regulatory and tax developments impacting the financial services industry and its players. To subscribe for the newsletter, send email to marketing@thsh.com.

[1] The SEC’s Adopting Release can be found here: https://www.sec.gov/rules/final/2016/ia-4509.pdf

[2] A redlined version of the Form ADV, marked to show the amendments, can be found here: https://www.sec.gov/rules/final/2016/ia-4509-form-adv-summary-of-changes.pdf

[3] However, it should be noted that the SEC declined to adopt a formal definition for separately managed account.

[4] The SEC’s Adopting Release can be found here: https://www.sec.gov/rules/final/2016/ia-4509.pdf

[4] A redlined version of the Form ADV, marked to show the amendments, can be found here: https://www.sec.gov/rules/final/2016/ia-4509-form-adv-summary-of-changes.pdf

[4] However, it should be noted that the SEC declined to adopt a formal definition for separately managed account.

[4] Investment advisers with less than $10 billion in RAUM attributable to separately managed accounts report borrowings corresponding to three levels of gross notional exposures whereas investment advisers with RAUM in separately managed accounts that exceed $10 billion must report borrowings corresponding to six levels.

[5] As defined in Rule 205-3 of the Advisers Act.

5 As defined in Rule 205-3 of the Advisers Act.

[6] Non-U.S. advisers should continue to look to the SEC’s Unibanco line of no-action letters for guidance regarding affiliate registrations. A memorandum regarding Unibanco is available under a separate cover; feel free to reach out to us for more information.

7 As defined in section 202(a)(17) of the Advisers Act an associated person, “means any partner, officer, or director of such investment adviser (or any person performing similar functions), or any person directly or indirectly controlling or controlled by such investment adviser, including any employee of such investment adviser, except that for the purposes of section 203 of this title (other than subsection (f) thereof), persons associated with an investment adviser whose functions are clerical or ministerial shall not be included in the meaning of such term. “

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