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SEC Proposes Amendments to Form ADV and the Books and Records Rule of the Advisers Act

On Behalf of | Jul 20, 2015 | Financial News

On May 20, 2015, the Securities and Exchange Commission (the “SEC”) issued Release No. 1A-4091 (the “Release”), which proposes amendments to Form ADV and to Rules 204-1 and 204-2 of the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC focused its proposed amendments in the following three areas: (1) to fill certain data gaps and to enhance current reporting requirements; (2) to incorporate “umbrella registration” for private fund advisors; and (3) to clarify technical and other amendments to existing items and instructions.

The proposed amendments to Form ADV and to the Advisers Act includes requiring:

  1. Increased information requested under Item 5 of Part 1A and Section 5 of Schedule D relating to separately managed accounts
  2. Additional information under Items 1 and 5 of Part 1A and Section 7 of Schedule D regarding investment advisors’ identifying information, the advisors’ advisory business, and industry affiliations
  3. Umbrella registration by an advisory business consisting of a filing advisor and one or more relying advisors
  4. Proposed clarification of technical and other amendments to Form ADV, such as:
    • Soliciting advisors’ clients to invest in a private fund
    • Audited financial statements
  5. Requiring investment advisors to maintain additional written materials relating to the calculation and distribution of performance information under the Advisers Act

The proposed amendments pertain to all investments advisors, including investment advisors to hedge funds and private funds and investment advisors who are not currently managing private funds. According to the SEC, the purpose of the proposed amendments is to enhance the staff’s ability to effectively carry out the SEC’s risk-based examination program and other risk assessment and monitoring activities with respect to the separately managed accounts and their investment advisors.

The proposed amendments would impose substantial new reporting requirements on many investment advisors. Comments regarding the Release must be submitted to the SEC on or before August 11, 2015.