Proposed SEC changes to RIA Form ADV; Good or Bad?

NEW YORK - June 16, 2015 - PRLog -- In May, SEC Chair, Mary Jo White reported that the proposed changes are part of a series of rulemakings the agency is putting forth to enhance the agency’s monitoring and regulation of the asset management industry, and that the agency also plans to use the additional data to enhance its ability to conduct “more targeted” exams. The information will allow the public and the Commission to better understand the risk profile of individual advisors and the industry.

However, smaller investment advisory firms cite that the changes will create more record-keeping, adding a new burden on already stretched to the limit compliance resources. A growing concern for smaller firms is that for every hour spent reviewing and completing compliance initiatives, an hour is lost in growing the practice. In addition, some firms state the proposed information is not meaningful and that Form ADV already contains too much information that prospective clients often don’t read.

A 60-day comment period is now open on SEC.gov where Investment Advisory firms are able to contribute their opinion of the changes.

The proposed changes to investment adviser registration and reporting include:

Require aggregate information related to assets held and use of borrowings and derivatives in separately managed accounts. (Approximately 73 percent of SEC registered investment advisers manage a wide variety of client assets in separately managed accounts, which generally provide advisory clients with individualized investment advice and direct ownership of the securities and other assets in the account.)

Permit, by rule, certain “umbrella registration” filing arrangements that are currently outlined in staff guidance.

Provide additional information about an adviser’s advisory business and including branch office operations and the use of social media.

Proposed changes to Investment Advisers Act Rules

Proposed amendments to Investment Advisers Act Rule 2042 would require advisers to maintain records of the calculation of performance information that is distributed to any person. Currently, advisers are required to maintain performance information that is distributed to 10 or more persons.

The proposed amendments also would require advisers to maintain communications related to performance or rate of return of accounts and securities recommendations.

RIA Firms needing help with compliance, registration, and audit services can contact RND Resources, Inc. for assistance: www.finracompliance.com

Join us in New York on June 29, 2015 for a 2 hour Compliance Roundtable discussion on this topic and others. Free to attend for compliance officers, CEO's, and managing partners. Registration is required. Sign up on our website.