Form ADV amendments for Exempt Reporting Advisers

9 October 2017

This article first appeared on Bovill Americas website and relates to Exempt Reporting Advisers in the US.

From the 1st October 2017 all investment advisers completing Form ADV are required to use a revised version of the form. Fortuitously, the two biggest changes (1) increased disclosure of separately managed accounts and (2) umbrella registration will not apply to and therefore have a minimal impact on Exempt Reporting Advisers (“ERA”). The amendments that will apply to ERAs include the following:

  1. Disclosure of internet presence – Prior to the changes, Item 1.I required advisers to provide their website addresses. The changes expand this disclosure to include all social media platforms (Facebook, Twitter, LinkedIn)
  2. Adviser’s Physical Office – Item 1.F will mostly not be applicable to ERAs. Item 1.F previously requested general information about the adviser’s principal office and place of business. Now the adviser is required to provide the total number of offices in which the adviser conducts business as well as information about their 25 largest offices.
  3. Chief Compliance Officer – This item is mostly inapplicable as well. Item 1.J previously requested the name and contact information of the adviser’s Chief Compliance Officer. New Item 1.J requires confirmation of whether the chief compliance officer is employed by someone other than the adviser.
  4. Balance Sheet Assets – Item 1.O previously required advisers to disclose whether the adviser had assets greater than $1 billion (assets on the adviser’s own balance sheet, not assets under management). Advisers with more than $1 billion will have to provide a range for their assets $1 billion to $10 billion; $10 billion to $50 billion; $50 billion or more.
  5. Financial Industry Affiliations; Private Fund updates – The amendments require investment advisers to (1) provide identifying numbers (such as CIK number) for related persons disclosed in Item 7.A of Schedule D and (2) with respect to private funds disclosed in Item 7.B of Schedule D that are relying on the exemption in Section 3(c)(1) of the Investment Company Act, confirm whether sales of the private fund are limited to “qualified clients”.

Clarifying Amendments

These changes are intended to clarify previously unclear items in Form ADV and do not necessarily represent changes to Form ADV or new items.

Soliciting Clients to Invest in a Private Fund– The Amendments clarify that when answering whether the investment adviser’s “clients” are solicited to invest in the private fund in Question 19 in Section 7.B.(1) of Schedule D, investment advisers should not consider feeder funds as “clients” of the investment adviser.

Audited Financial Statements – Question 23(g) in Section 7.B.(1) of Schedule D -The Amendments clarify that when answering whether a fund’s audited financial statements are distributed to the fund’s investors, advisers should answer considering the fund’s audited financial statements from the most recently completed fiscal year. Additionally, the Amendments clarify that when answering whether a report prepared by an auditing firm contains an unqualified opinion in Question 23(h) in Section 7.B.(1) of Schedule D, advisers should answer considering the reports prepared by the auditing firm since the investment adviser last filed its annual amendment.

Amendment to Recordkeeping Rules

Separate from Form ADV, the SEC has made amendments to several Advisers Act rules including rule 204-2 which requires advisers to make and keep supporting documentation that demonstrates performance calculations or rates of return in any written communications that the adviser circulates or distributes, directly or indirectly, to any person. Advisers also will be required to maintain originals of all written communications received and copies of written communications sent by them related to the performance or rate of return of any or all managed accounts or securities recommendations.

We can help

This year Bovill has expanded its global capabilities by opening an office in United States and adding a dedicated resource in the APAC region to further enrich our US regulatory service.

Bovill provides a comprehensive suite of US regulatory services from Form ADV review and drafting services to regulatory filing assistance. Bovill can help you navigate the upcoming Form ADV changes and more broadly with all your US compliance needs from both its global offices.

If you have any questions about these requirements or need any other support please contact your relationship manager or Ross Goffi on rgoffi@bovill.com.

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