What’s New in Form ADV?

Last week, in addition to adopting new investment adviser registration requirements and exemptions, the SEC adopted several revisions to Form ADV Part 1A that require advisers to provide more detailed information about private funds they advise, their advisory business (including types of clients, employees, and advisory activities), and outside business activities and financial industry activities. With respect to private fund reporting information, the revised Form ADV requires both registered and exempt advisers to provide in Section 7.B of Schedule D, for each private fund advised by the adviser, information including the name of the fund, the jurisdiction of organization, the persons involved in managing the fund, the fund’s regulatory status, the investment strategies employed, and certain information about the investors in the fund.

The SEC also amended Item 5 (advisory business information) to include requiring information about how many employees are registered as investment adviser representatives or are licensed insurance agents, in addition to the existing questions that ask about employees that perform investment advisory functions or are registered representatives of a broker-dealer. All of these questions now require a single numerical response (as opposed to a range, which is currently used). Item 5 also now requires more detailed information on the number and types of clients as well as whether the adviser represents itself to clients as specializing in certain types of investments. Amendments to Items 6 and 7, relating to other business activities and financial industry affiliations, require advisers to indicate whether it or a related person is a trust company, municipal advisor, security-based swap dealer, or major security-based swap participant, and whether the adviser is an accountant (or accounting firm) or lawyer (or law firm). The SEC clarified that for responses relating to natural persons (e.g., accountant, lawyer), the adviser only needs to respond affirmatively if such persons have a separate business in that field not for persons employed by the adviser as accountants or lawyers.

For additional information on the revisions to Form ADV and how they will affect the reporting obligations of registered and exempt advisers, please contact Zac Rosenberg, Compliance Consultant by email at zachary.rosenberg@corecls.com or by phone at (619) 278-0020.