An increasingly litigious society makes it harder for investments advisors to maintain a spotless record. A new report from New York-based Diligence Review Corp. illustrates the problem.
The report, “Red-Yellow-Green: Report on All SEC-Registered Investment Advisors,” finds that with 11,622 investment advisors registered with the SEC collectively managing $50 trillion in assets, only 10% of those assets were held by firms on the “green list,” indicating a clean compliance record. That list comprised 46% of advisors.
The authors define investment advisors as those firms that offer mutual funds, ETFs, pooled and separate account management arrangements. As they note, U.S. investment advisory firms that manage $100 million in assets or more are required to register with the U.S. Securities and Exchange Commission (“SEC”) via Form ADV. The firm downloaded the SEC Form ADV data on July 2 for its review.
The authors note investment advisors include many private fund advisors, including hedge fund and private equity fund advisors. Venture capital advisors, foreign private advisors and small private fund advisors (those who manage less than $150 million) are currently classified by the SEC as “exempt” advisors. Data relating to exempt advisors are not included in the report.
Key Findings: A total of 11,622 investment advisors were registered with the SEC as of July 2. These advisors had total regulatory AUM of $49,446,235,716,391. In other words, they manage nearly $50 trillion.