Alternative Investment

SEC Announces Additional Required Disclosures on Form ADV

September 2016

Recently, the U.S. Securities and Exchange Commission (SEC) adopted proposals which will require registered investment advisers to provide additional information on their Form ADV, commenting that, the “amendments are an important step in a series of rulemaking activities to enhance the SEC’s monitoring and regulation of the asset management industry.” The amendments, which include changes to the reporting requirements of separately managed accounts (SMAs), use of social media, and performance reporting, will take effect as of October 1, 2017. Specifically, the new reporting requirements will include the following:

• Investment advisers will be required to provide additional information specific to their SMAs use of borrowing and derivative activity, designed to help the SEC staff during the risk assessments and monitoring activities of advisers.
• ​Enhanced disclosures will be required related to advisers’ use of social media. Currently the SEC requires advisers to only include their company website on Form ADV. Under the new amendments, advisers will also be required to disclose the use and address of any social media outlets including Twitter, Facebook and LinkedIn. The new requirements will allow the SEC to review advisers’ use of social media, in order to compare the information provided through the use of the various outlets, as well as to prepare for an examination.
• Performance reporting requirements under Rule 204-2 have been amended, changing the current standard of requiring advisers to maintain records supporting performance if they are distributed to 10 or more persons to now requiring advisers to maintain records if they are distributed to “any person.” In addition, the new amendment will require advisers to retain all original records of written communications received and copies of all communication sent related to an adviser’s performance or rate-of-return in connection with any or all managed accounts, as well as any securities recommendations.

For further information, and to view the entire rule, please visit the SEC’s website.