SEC Inreases Amount of Data Advisors Must Include on Form ADV

Advisors must provide more data on separate accounts, social media and branch offices; must comply by Oct. 1, 2017


The Securities and Exchange Commission adopted final amendments Thursday requiring advisors to disclose more information on Forms ADV about their use of separately managed accounts, branch office operations and social media.

The amendments also incorporate a method for private fund advisor entities operating a single advisory business to register using a single Form ADV.

The new rules take effect Oct. 1, 2017.

“Requiring investment advisors to report this additional information will provide investors and the Commission with a better understanding of the risk profile of each advisor and the industry as a whole,” said SEC Chairwoman Mary Jo White, in a statement.

Advisors will have to provide aggregate data about their separate account use related to the use of borrowings and derivatives.

Karen Barr, president and CEO of the Investment Adviser Association, said the final rule includes changes recommended by IAA to raise the threshold from $150 million to $500 million in separately managed accounts for advisors to report clients’ use of derivatives. This change “will alleviate the burden on thousands of smaller advisors while still allowing the SEC to meet its regulatory objectives,” Barr said.

Barr also said the one-year compliance date “should provide firms with necessary time to develop the collection and reporting of new data to the SEC.”

Amendments to Investment Advisers Act Rule 204-2 will require advisors to maintain additional records related to the calculation and distribution of performance information.

The agency noted that its examinations staff can use this information to help evaluate advisor performance claims, and “could reduce the incidence of misleading or fraudulent advertising and communications by advisors.”

As to branch offices, the SEC currently requires an advisor to provide contact and other information about its principal office and place of business, and, if an advisor conducts advisory activities from more than one location, about its largest five offices in terms of number of employees.

Under the final rule, however, the Commission states that in order to help exam staffers learn more about an advisor’s business and identify locations to conduct exams, the new rule will require advisors to provide information on the “total number of offices at which they conduct investment advisory business” as well as about their 25 largest offices in terms of number of employees.

As to social media, the SEC states that “because the social media environment is rapidly evolving, we think it will be useful to the Commission and investors to have current information on an advisor’s use of social media on Form ADV.”

As it stands now, advisors have to list their website addresses on Form ADV. The revised Form ADV, IAA explains, “will require them to also list their other social media platforms, if any, such as Twitter, Facebook, or LinkedIn and provide the address.” Advisors will only list their publicly available sites if they control the content, IAA says. “The SEC is not requiring information about the social media accounts of employees.”

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