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SEC Issues FAQs Guidance on Form ADV

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The Securities and Exchange Commission has released additional Form ADV and IARD frequently-asked-questions guidance addressing cross-border investment managers.

Staff in the SEC’s Division of Investment Management advises in the FAQs that non-U.S. investment funds, including Undertakings for Collective Investment in Transferable Securities (UCITS), which are mutual funds based in the European Union, should be classified as “pooled investment vehicles” when describing assets.

Also, a non-resident general practitioner or managing agent of a “relying advisor” must file Form ADV-NR.

Cipperman Compliance Services notes that the guidance also “broadly defines ‘borrowings’ for purposes of whether an advisor engages in borrowing transactions on behalf of clients, explain social media disclosure, and clarify that the new Form supersedes SEC no-action relief with respect to relying advisors.”

In 2012, the staff of the Commission provided guidance that enumerated conditions under which the staff believed one advisor (the “filing advisor”) could file a single Form ADV on behalf of itself and other advisors that were controlled by or under common control with the filing adviser (each, a “relying advisor”), provided that they conducted a single advisory business (collectively an “umbrella registration”).

With the June FAQs, the SEC “continues to take an extra-territorial regulatory approach to any cross-border advisor that must register in the U.S.,” Cipperman opines.

The updated FAQs also highlights the staff summary of changes adopted to Form ADV Part 1A that will be implemented on Oct. 1.

Form ADV deficiencies were noted by the SEC in a February risk alert issued by the agency flagging the top five compliance failures detected in exams.

The SEC last August adopted final amendments requiring advisors to disclose more information on Forms ADV about their use of separately managed accounts, branch office operations and social media.

— Related on ThinkAdvisor: FINRA’s Axelrod Warns Financial Industry: Adapt or Die


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