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Regulation and Compliance > Federal Regulation > SEC

The 2018 Regulatory Texas Two-Step

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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.

Wallman also highlights the SEC’s continued activity “in reaffirming when an investment advisor has imputed custody over client assets.” FOLIOfn and its advisory clients “have been reviewing agreements and practices to ensure that the language and policies align with advisor expectations,” he explains.


In mid-December, the SEC modified its approach to the pending requirement for registered investment companies to file Form NPORT electronically “while the agency continues its previously announced review and uplift of its EDGAR and other systems,” according to SEC Chairman Jay Clayton.

For the first nine months after the Form N-PORT compliance date of June 1, 2018, “larger fund groups will maintain the Form N-PORT information in their records and make it available to the Commission upon request in lieu of filing the form on EDGAR,” the SEC said. “Smaller fund groups will continue to benefit from a filing start date that is one year after larger fund groups begin filing the form.”

Clayton said the Form N-PORT action “is a prudent step as we continue our work to uplift EDGAR and other systems and assess our data needs, including how and when we collect market-sensitive data.”

He stressed the importance of the requirement “that larger fund groups maintain — and Commission staff have access to — the information required on Form N-PORT.”

Form NPORT require registered investment companies, such as mutual funds, to report enhanced information about their monthly portfolio holdings in a structured data format. Filing of Form N-PORT through the EDGAR system will begin in April 2019 for larger fund groups and in April 2020 for smaller fund groups.

“To ensure that investors do not lose access to important information, the Commission is requiring funds to continue filing public reports on existing Form NQ until they begin filing reports on Form N-PORT using EDGAR,” the SEC said. 


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