The Securities and Exchange Commission (SEC) recently announced revisions to the ADV Part 1.  These changes will affect most Registered Investment Advisers (RIAs) when they complete their annual amendment; however, RIAs may be prompted to address additional questions if a firm submits an amendment on or after October 1st.

The revisions made by the SEC only affect Part 1 of Form ADV.  Most of the revisions were made to provide regulators with more information that they find pertinent.  In some cases, clarifications were made to cover areas where there were frequent questions.

Below is a summary of some of the more significant changes:

Social Media Sites

Firms will be required to disclose social media sites maintained by the firm, such as sites like LinkedIn, Twitter, Facebook, etc.

Breakout of Assets Under Management (AUM) Reporting

Currently, AUM is reported as discretionary and non-discretionary. While this will still be required, the revisions will require firms to list AUM by client type as well. This will make the calculation of AUM much more cumbersome for most RIAs.

Firms will also be required to report the number and AUM of clients who are non-United States persons.

AUM Reporting: Separately Managed Accounts (SMAs)

Firms that have separately managed accounts will need to report AUM by asset type as a percentage.

  • If a firm exceeds 10 billion in SMA assets, this has to be listed for mid-year and end of year.
  • If a firm has less than 10 billion in SMA assets, the percentage breakdown is only required for end of year assets.

AUM Reporting: Wrap Fee Programs

If a firm participates in a wrap fee program, it will be required to list the amount of AUM attributable to wrap programs where the Firm act as:

  • sponsor;
  • portfolio manager; or
  • both the sponsor and portfolio manager

Branch Office Disclosures

Firms will need to list the total number of offices, other than the home office, at which they conduct investment advisory business. Currently Firms are required to list only their five largest offices.  The amendments require firms to list the 25 largest branches along with additional info on each of these branches.

Umbrella Registration

Umbrella registration is provided for firms that have multiple private fund adviser entities operating a single adviser business. This is not a new concept, but the amendments do expand the reporting requirements for these firms.  It is important to note that umbrella registration is only available when certain conditions are met.

 

Even if you do not make an ADV update before the end of 2016, your firm should be preparing to gather the information above for its Annual Update.  It is recommended that you review the applicable sections of ADV Part 1 to ensure you have the ability to report assets under management to the degree requested.  If you are unable to pull the required reports, you will need to work with your custodian, or make manual calculations in order to comply with the new amendments.