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SEC Amends Form ADV And Recordkeeping Rules 

by Scott McBride, Scott H. Moss, Esq. and George Danenhauer, Esq.

Published: December, 2016

Submission: December, 2016

 



On August 25, the Securities and Exchange Commission (the “SEC”) adopted a final rule making amendments to Form ADV providing for (i) the disclosure of additional information regarding advisers, including information about their separately managed accounts, (ii) a method for private fund adviser entities operating a single advisory business to register using a single Form ADV, and (iii) certain clarifying, technical, and other amendments to certain Form ADV items and instructions. The SEC also adopted amendments to the books and records rule under the Investment Advisers Act of 1940 (the “Advisers Act”).


Background


The amendments adopted in the final rule are largely consistent with the proposed amendments, but with several modifications to address comments received. Compliance with the amendments adopted in the final rule is generally required on or after October 1, 2017. The amendments are summarized below.


Separately Managed Accounts


Advisers are required to report aggregate information about their separately managed accounts, which the SEC considers to include all advisory accounts other than those that are pooled investment vehicles (i.e., registered investment companies, business development companies, and pooled investment vehicles that are not registered). The specific separate account reporting requirements include amendments to Item 5 of Part 1A and Section 5 of Schedule D of Form ADV requiring aggregate-level information regarding separately managed accounts:


  • Section 5.K.(1) of Schedule D requires the reporting of the approximate percentage of separately managed account regulatory assets under management that are invested in 12 broad asset categories, with such percentages to be reported annually by advisers with less than $10 billion in regulatory assets under management attributable to separately managed accounts and twice a year by advisers with $10 billion or more in such regulatoryassets under management;
  • Section 5.K.(2) of Schedule D requires the reporting of information regarding the use of borrowings and derivatives in separately managed accounts. Advisers having at least $500 million in regulatory assets under management attributable to separately managed accounts are required to report the amount of such regulatory assets under management and the dollar amount of borrowings attributable to those assets that correspond to three levels of gross notional exposure (less than 10%, 10%-149%, and 150% or more). Advisers with $10 billion or more in such regulatory assets under management are also required to report information concerning derivatives exposures across six derivatives categories. Advisers may exclude any separately managed INVESTMENT MANAGEMENT Client Alert / September 7, 2016 accounts with regulatory assets under management of less than $10 million; and

 

 

 
 

 

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