The 2018 Regulatory Texas Two-Step

While new regulations are likely on the horizon, firms’ compliance with rules ushered in last year will spill over into the New Year. Firms, for instance, will continue to keep up with the sweeping changes to Form ADV Part 1 that became effective on Oct. 1, 2017, both David Tittsworth and Steve Wallman say.

For investment advisors, “revisions to Form ADV — and Form N-PORT for mutual funds — should be a current priority for their upcoming reporting amendments in 2018,” according Tittsworth, counselin Ropes & Gray. 

Form ADV

Advisory firms are now required to disclose more information on Forms ADV Part 1 about their use of separately managed accounts, branch office operations and social media. The amendments also incorporate a method for private-fund advisor entities operating a single advisory business to register using a single Form ADV.

The new changes impact Form ADV Part 1, the form that the SEC uses to analyze the industry and that its exam unit, the Office of Compliance Inspections and Examinations, relies on to assess a firm’s risk.

As to the new Form ADV Part I requirements, “we will be providing our advisor clients additional data as needed to support their regulatory reporting obligations specific to separately managed accounts,” said Wallman, CEO of FOLIOfn.

For mutual funds, “the SEC’s liquidity rule will certainly consume a lot of time and effort during the coming year,” Tittsworth explains.

The Investment Company Institute has requested the SEC “delay and change the rule before the rule’s Jan. 1, 2019, effective date,” and the SEC “will address those issues in the coming weeks and months,” he adds.

Other potential rulemakings, according to Tittsworth, include: recommendations from the Oct. 26 Treasury Report on Asset Management — such as a potential delay and revision of the SEC’s Liquidity Rule – as well as potential rulemakings on derivatives and plain vanilla ETFs.