Podcast Center
Video Center
Webcasts
Resource Center
Events
March 01, 2016 at 07:00 PM
Can this be true? A law that reduces an advisor’s regulatory burden? Believe it or not, the answer is yes! But, does it make sense for advisors to take advantage of this morsel?
On Dec. 4, 2015, the Fixing America’s Surface Transportation (FAST) Act became a law. Whether you approve or disapprove of omnibus bills that throw everything and the kitchen sink at lobbyists and constituents is another subject entirely, but the key takeaway is that this ill-named omnibus bill amended Section 503 of the Gramm-Leach-Bliley Act (GLBA). The GLBA previously required registered investment advisors and private funds to deliver annual privacy notices to their clients.
Instead, the FAST Act now provides a carve-out from the annual delivery requirement for investment advisors and private funds so long as they meet the following two conditions:
-
The investment advisor or private fund cannot share nonpublic information with nonaffiliated third parties (except with limited exceptions for necessary service providers, such as custodians, or in discussing a pending acquisition or merger).
-
The investment advisor or private fund has not revised its privacy policies since it provided its clients its most recent privacy notice.
Advisors and private funds must meet both of these conditions if they wish to avoid sending out a privacy notice on an annual basis. That being said, these institutions must continue to provide initial privacy notices to clients prior to entering into a relationship.
I recommend that advisors and private funds carefully review their privacy policy and weigh the above two conditions before determining whether they should stop sending an annual privacy notice to their clients and investors.
Why Advisors Should Still Send an Annual Privacy Notice
While I certainly appreciate that the elimination of any regulation is a plus, especially one that is vastly ignored by recipients (the overwhelming majority of advisors do not share information with any third parties, other than for the express purpose of serving their clients), perhaps advisors should consider passing on this opportunity. Why?
Within 120 days of an advisor’s fiscal year-end, the advisor must make an annual written offer of its most current brochure (Part 2A of Form ADV), together with a corresponding summary of any material brochure changes or, in lieu of the offer, provide the current brochure.
