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Regulation and Compliance > Federal Regulation > SEC

SEC Issues More Guidance on Form ADV Changes

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The Securities and Exchange Commission continues to field questions from advisors about how to comply with the significant changes to Form ADV that kick in on Oct. 1.

In a just-released information update, the agency’s Division of Investment Management clarified its view that if a firm filing a Form ADV does not have enough data to provide a complete response to a new or amended question in Item 5 or Section 5 of Schedule D after Oct. 1 until the filer’s next annual amendment, the staff would not recommend enforcement action if the filer responds “0” as a placeholder to submit the ADV (with a note in the Miscellaneous section of Schedule D to identify that a placeholder value of “0” was entered), according to Monique Botkin, associate general counsel for the Investment Adviser Association in Washington. 

“There has been confusion about amendments after Oct. 1, 2017, to certain items on the form that only require annual updates,” Botkin told ThinkAdvisor Wednesday. “This guidance provides more clarity on what filers can and should do.”

As Frontline Compliance noted in a Wednesday alert, starting Oct. 1, the online system (IARD) for Form ADV filings will be modified to account for the changes to Form ADV as required by Advisers Act Release No. 4509, issued on Aug. 25, 2016.

That’s when former SEC Chairwoman Mary Jo White announced that the agency 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.

Most of the Form ADV changes, Frontline said, come under Section 5 of Part 1A, Schedule D, and Section 7B for private funds.

Frontline notes that the SEC has received multiple comments and questions regarding the implications of the new filing requirement for firms that file an “other-than-annual amendment” between Oct. 1, 2017, and March 31, 2018.

“One issue raised, for instance, is that after Oct. 1 a firm simply needing to update its executive team via an ‘other-than-annual amendment’ would be forced to also update all the newly required sections in the new form since the system will not accept incomplete filings,” Frontline explains.

To address this type of situation, IM “will allow firms to input ‘0’ figures for the new questions within the Form, if they also update the Miscellaneous section of Schedule D to describe that the ‘0’ values are only being submitted as placeholders until the firm’s next required annual updating amendment,” Frontline said.

— Check out SEC Issues FAQs Guidance on Form ADV on ThinkAdvisor.


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