On October 1, 2017, the SEC updated and expanded the information required in the Form ADV, which means that if your fiscal year ended on December 31, 2017, it’s time for you to start thinking about your annual Form ADV amendment, which for many of you, will be your first time dealing with these new requirements.
To help you with the process, Adam Stutz and Kurt Nuñez, two of our experienced compliance consultants, will be presenting our January 24 webinar, Form ADV: Practical Tips on Completing the Newly Revised SEC Registration Form. However, before attending the webinar, Adam and Kurt have outlined some suggestions on how you can start preparing for your Form ADV filing now in order to get ahead:
Form ADV Preparation starts with knowing what you need to gather in the first place.
Exactly what you need to gather depends on the nature of the firm’s business practices. Form ADV Part 1 now requires additional information that relates to Regulatory Assets Under Management (“RAUM.”). Specifically, firms are required to provide the amount of RAUM by client type and in aggregate by asset classification type (i.e., equites, fixed income etc.).
The SEC issued a redlined version of Form ADV Part 1 detailing the changes and additional information required, which can be found by clicking here.
However, before you start trying to fill in your Form ADV, you need to make a complete and thorough list of all the applicable information that you’ll be required to include. A suggestion is to go through the redlined document and create an inventory of the information that you will need. Determine which departments/persons you’ll need to work with and begin communicating what you’ll need. In addition, consider whether it would be beneficial and cost effective in the long run to get outside help from a consulting group such as Core Compliance? to assist with completing the Form ADV.
Where do you gather the information you need?
As with any big project, the more planning and data gathering you do ahead of time, the more smoothly the entire process will run.
That means you’ll need to look at your resources and how your firm is run. As you gather data you will need to delegate responsibilities, and this may vary from business to business. For example, a firm with only two people will need to delegate responsibilities differently than a firm with dozens or even hundreds of employees.
In the case of larger firms, one suggestion is to form a Form ADV committee. The committee should be comprised of managers from different departments that can take on the responsibilities for specific areas of data gathering. For example, you could assign your operations department to reach out to the custodians to get information related to RAUM and the classification of assets.
Determining the most efficient way to gather the necessary information:
Your firm needs adequate time to gather data as well as input it, and waiting until the last minute is a sure way to risk mistakes being made as everyone rushes to meet the deadline. This year, the due date for filing the Form ADV annual amendment is Monday April 2, 2018 (since March 31st falls on a weekend). It’s important to be mindful of this deadline and be prepared, so you’re not trying to file your annual amendment at the last possible minute. Set clear due dates for the different data points and information your committee or team is responsible for gathering and communicate well in advance.
Start earlier, rather than later, to allow for time so you can be confident that all relevant information has been found and to allow for time to do a quality check to ensure the completeness of data.
If you find you need help from a third-party compliance consultant, starting the work on your Form ADV in January or February means you’ll have an easier time working with your consultant to gather and organize your data, and, if your data gathering unearths problems or discrepancies, you will have time to make the necessary corrections.
As you go through the entire Form ADV amendment process, be sure that you are thoroughly documenting everything along the way!
There are many reasons to thoroughly document your Form ADV annual amendment process. In addition to being compliant with SEC regulations, the other reason, is that you’re going to have to do all of this again.
Even if you only file a Form ADV amendment annually, you’re still going to have to file it every year going forward.
If you’re a sole proprietor, you’re probably going to remember most of what you’ve done and how to find that information – but how sure can you be that you’re going to remember every step of the process?
Document your steps and maintain copies of your data, it will save you from a later headache.
Documenting not just who is responsible for obtaining specific data points, but where the data is obtained from, the steps to acquire the data, and organizing the data for efficient Form ADV updates makes the entire process faster and effective. Plus, should you need to file an other-than-annual amendment, you’ll have the entire process at your fingertips for easy reference.
Remember, regardless of the size of your firm, it’s always important to have well-organized and well- documented policies and procedures in place.
Make it easier on yourself, and know that if your firm should have an SEC examiner come knocking, you’ll have everything documented and easily accessible ahead of time.
Start your Form ADV annual amendments now to be prepared in time.
With all the new information required, you’ll want to get as ahead as possible on preparing and filing your Form ADV annual amendment.
The team at Core Compliance? is here to help, and that’s why we’re putting on our free webinar. Sign up and attend so you can learn more suggestions and tips on how to gather and prepare the information for your Form ADV filing. In addition, we’ll be providing our Form ADV questionnaire to attendees, which will help in the data gathering process.
To sign up for the webinar, simply enter your information on the page linked here.