Determining if delivery of Form ADV is required for each client or prospective client that contains all information required by Part 2 of Form ADV and what must be included in the Firm’s ADV is a complex topic. An RIA should consult an attorney or compliance consultant to ensure their brochure contains the necessary information.
For advisers to utilize electronic delivery for regulatory documents such as disclosures, prospectuses, shareholder reports, and proxy solicitation materials, there are a few requirements that must be met. The SEC’s guidance states that the electronic distribution of regulatory materials must satisfy the following three elements:
The Release contains over fifty Q&A examples to illustrate the interplay of these three elements – twenty-two of which relate to mutual funds. See the additional resources file for a copy of the release.
Act 20, known as the “Export Services Act”, provides tax exemptions and tax credits to businesses engaged in eligible activities in Puerto Rico and has made the island a hot spot for exportation of international services worldwide. These tax laws were the response to Puerto Rico’s ballooning national debt that started accumulating when the US government cut federal subsidies to the island in 1996. Beginning in 2012, Puerto Rico used its special status within the United States to create unique tax incentives that would lure successful employers down to the island to bring capital and create jobs. The tax benefits Puerto Rico’s Act 20 offers are as follows:
For more details on the benefits of Act 20, check out our Act 20: Puerto Rico Tax Incentives blog now.
To be able to take advantage of Act 20, there are 3 major steps you need to take for your company to qualify for these tax benefits.
Investment advisers that have custody of client funds or securities are required to undergo an annual surprise examination by an independent public accountant to verify client funds and securities. Form ADV-E is used as a cover page for a certificate of accounting of securities and funds of which the investment adviser has custody, aka a surprise exam report. Form ADV-E contains both information about the adviser and the surprise exam conducted. The Form ADV-E is filled out by the investment adviser and then submitted along with the surprise examination report or statement by the independent public accountant after a surprise inspection of the adviser.
In January of 2012, Puerto Rico passed legislation making it a tax haven for U.S. citizens that become residents of Puerto Rico. The tax laws, known as Act 20, the Export Services Act, and Act 22, the Individual Investors Act, shields new residents residing in Puerto Rico for at least half of the year from paying most federal income taxes. The U.S. Tax Code generously exempts Puerto Rico sourced income from federal tax, and, under the law, residents pay minimal or possibly no taxes on interests and dividends, as well as capital gains. Additionally, property taxes are significantly lower than property taxes in the mainland U.S. Thus, making Puerto Rico a hot spot for exportation of international services worldwide.
These tax laws were the response to Puerto Rico’s ballooning national debt that started accumulating when the US government cut federal subsidies to the island in 1996. Beginning in 2012, Puerto Rico used its special status within the United States to create unique tax incentives that would lure successful employers down to the island to bring capital and create jobs.
Once granted, the benefits under Act 20 and 22 will be secured during the entire term of the act, regardless of changes in the Puerto Rico tax laws applicable. The act shall have a term of 15 years (from 2012) with possible 15-year extension in the case of Act 20 and until December 31, 2030 in the case of Act 22.
Under rule 17a-14 under the Securities Exchange Act of 1934 and rule 204-5 under the Investment Advisers Act of 1940, broker-dealers registered under section 15 of the Exchange Act and investment advisers registered under section 203 of the Advisers Act are required to deliver to retail investors a relationship summary, Form ADV Part 3, disclosing certain information about the firm. Read all the General Instructions as well as the particular item requirements before preparing or updating the relationship summary.