Annual Updating Amendments to Form ADV are due within 90 days of an adviser’s fiscal year end. For most advisers, this will fall on March 31, 2014. Significantly, SEC and state registrants as well as all Exempt Reporting Advisers (“ERA”) share this same timeline and should start planning their filings as soon as possible. For ERAs, the short-form ADV contains fewer items (underlined below for ease of reference) so these firms may prefer to file it as soon as their year-end numbers are final to check it off their lists.
Where applicable, the ADV items listed below include the corresponding Schedules A-D.
1. Typical Updates Applicable to Most Firms
ADV Part 1A (all firms) includes a number of items that will nearly always be updated in the annual filing:
- Item 5.F., Regulatory Assets Under Management (“RAUM”);
- Item 7.B/Schedule D Section 7.B(1): Private Fund Reporting, which includes information about a fund’s asset levels and investor counts; and
- Item 9, Custody: includes dollar amounts and client counts over which an advisor or its related persons have custody.
2. Consider Other Business Changes
The following items do not require amendments during the year and should be kept in mind for the annual filing.
ADV Part 1A (all firms):
- Items 5, Information About Your Advisory Business:
- A and B: employee counts;
- C and D: client counts and client types (the latter includes percentages of head count and of RAUM);
- Item 6, Other Business Activities (i.e., of the registrant)
- Item 7, Financial Industry Affiliations (this looks similar to Other Business Activities in Item 6, but refers to the registrant’s “Related Persons,” as defined in the ADV instructions) and Private Fund Reporting (see also related sections of Schedule D); an
- Item 12, Small Businesses (SEC registrants only).
ADV Part 1B (state registrants):
- Item 2.H and J, questions regarding financial planning firms and sole proprietorships, respectively.
3. Other Items Requiring Prompt Amendments
The following are items that are amended promptly as they occur, rather than waiting for the annual filing. If these were not amended during the year, they should be reflected on the annual amendment.
Part 1A (all firms):
- Item 1, Identifying Information. Among other things, this includes:
- Addresses and telephone numbers;
- Name and contact information for the Chief Compliance Officer; and
- Business hours.
- Item 3, Form of Organization;
- Item 9.C. and D., Custody. This includes information about:
- How the firm manages custody rule requirements;
- Whether a related person acts as custodian.
- Item 11, Disciplinary Information and any applicable Disclosure Reporting Pages.
The above require amendment if the information provided becomes inaccurate in any way; the below require amendment only if information becomes materially inaccurate. Note that some of these items have a corresponding section of Schedule D.
- Item 4, Successions;
- Item 8, Participation or Interest in Client Transactions; and
- Item 10, Control Persons (includes Schedules A-C).
Part 1B (state firms):
- Item 1, State Registration;
- Item 2.A-F, I, Additional Information, including:
- Person responsible for supervision and compliance;
- Bond and minimum capital requirements;
- Disclosure information and any applicable Disclosure Reporting Pages; and
The above require amendment if the information provided becomes inaccurate in any way; the below requires amendment only if information becomes materially inaccurate.
- Item 2.G, Other Business Activities.
Part 2: If any information in the Firm Brochure and/or supplement(s) become materially inaccurate, an Other-than-Annual amendment is required. Exception for Part 2A: the firm’s amounts under management (Item 4.E) and fee schedule (Item 5.A) need not be updated during the year, even if the firm is otherwise amending Part 2A.
4. Filing and Deliveries
State filing fees should have been submitted as part of IARD’s annual renewal program (see our post Investment Advisers: Compliance To-Do List for Year-End). This program covers:
- State registrants;
- Exempt Reporting Advisers filing in one or more states;
- SEC registrants notice filing in one or more states; and
- SEC registrants that have Investment Adviser Representatives registered in one or more states.
If they have not done so already, SEC registrants and exempt firms should separately submit the IARD processing fee amount corresponding to their RAUM level before they intend to file their Annual Updating Amendment, considering mailing times for checks and adding two days for posting once received, even for electronic filings and wires. IARD does not process filings where fees are owed.
IARD has a “Completeness Check” feature which is helpful as a quick reference for errors or missing information (including fees). CCOs who need to obtain information from other departments might find it useful to circulate to those responsible for gathering information for any responses. The Completeness Check also runs automatically when a filing is submitted, halting submission so the identified errors and missing information can be corrected.
Within 120 days of the firm’s fiscal year end (i.e., a month after the Annual Updating Amendment is filed or April 30, 2014 for most firms) all registrants must deliver or offer to deliver a copy of the updated Brochure (ADV Part 2A) to their clients. Note that for most purposes, the term “client” in Form ADV refers to the direct clients of a firm and not to investors in any private funds the firm sponsors (though it is not uncommon for firms to elect to deliver or offer the ADV Part 2as a matter of investor relations). Some key takeaways on deliveries:
- They should be timely;
- They should be documented. While firms should be archiving their email, which will capture the outbound communication, it is a good idea to establish a standard wording for this communication and create a log (among other things, a log operates as a quick reference and is easier to supply in response to an examination request than digging through the email archive);
- If offering rather than delivering, the offer must, per the ADV instructions, provide a summary of the material changes to the brochure (copying and pasting from Item 2 makes this easy).