All registered investment adviser (“RIA”) firms, whether registered at the federal or state level, need to file this year’s required Form ADV amendment within 90 days of the firm’s fiscal year-end (generally March 31, 2018 with a traditional December 31, 2017 fiscal year end date). Even if an RIA firm was first registered in late 2017, the investment advisory firm is still required to file annual Form ADV updating amendment by March 31, 2018 if the firm has a traditional December fiscal year-end. Failure to file the required annual amendment can result in serious regulatory issues.
Significant Form ADV Changes Took Effect on October 1, 2017: Don’t Wait to File This Year’s Renewal
This year’s RIA registration renewal process is more complex than past years given a number of new changes to the Form ADV. Effective as of October 1, 2017, the new changes require additional disclosures related to social media accounts, types and number of clients, separately managed accounts, wrap fee programs, and more. These new Form ADV changes impact state and SEC-registered RIA firms and are the most significant changes to take place since the introduction of the Form ADV Part 2 narrative brochure in 2011.
Many advisory firms are under estimating the time required to gather and provide the new information required by the Form ADV part 1A changes. In particular, many firms may not initially recognize that the SEC staff has broadly defined a separately managed account:
“for purposes of reporting on Form ADV, we consider advisory accounts other than those that are pooled investment vehicles (i.e., registered investment companies, business development companies and pooled investment vehicles that are not registered (including, but not limited to, private funds)) to be separately managed accounts.”
We strongly suggest that RIA firms do not wait until the deadline to file the firm’s Form ADV annual updating amendment, as the online Investment Adviser Registration Depository (“IARD”) filing system will not allow a firm to file its amendment unless all new Form ADV questions have been answered completely.
Form ADV and Privacy Policy Annual Delivery Requirements
In addition to submitting the annual updating amendment, RIA firms must also comply with the Form ADV and privacy policy annual delivery requirements which include:
- Deliver a copy of the RIA firm’s privacy policy to all clients on an annual basis.
- Inform all clients of any material changes to the firm’s Form ADV within 120 days of the firm’s fiscal year end (April 30, 2018 for firms with a December fiscal year-end) by doing one of the following:
- Deliver to each client a summary of the firm’s Form ADV material changes along with instructions on how a client can obtain the firm’s full updated Form ADV Part 2 (or)
- Deliver a full copy of the firm’s full updated Form ADV Part 2 to clients which includes a summary of material changes.
Furthermore, we recommend the following best practices related to the annual delivery requirements:
- While not required, RIA firms may want to deliver the privacy policy and updated Form ADV Part 2 to clients at the same time to meet both requirements.
- Before a firm begins sending these documents electronically to a client, the firm must first have an electronic delivery authorization on file for the client.
- If sending electronically to clients, the documents should be directly attached to the email. Simply providing a link to access these documents will generally not suffice as meeting the firm’s delivery requirements.
- Whether sending these documents electronically or by mail, the firm should log this delivery for each client in the firm’s compliance files.
It’s important to remember that RIA firms registered with the SEC will also need to pay the SEC Annual Updating Amendment Fee before being able to file the required Form ADV amendment. Traditionally, the SEC amendment fee for RIA firms with over $100 million in regulatory assets under management (“AUM”) is $225. For SEC-registered firms with between $25-$100 million in AUM, the fee is $150 and for the SEC-registered firms with less than $25 million in AUM, the fee is $40. These SEC annual amendment fees are charged in addition to the annual notice-filing and individual investment adviser representative registration fees which were previously charged to RIA firms in December by the relevant states to firms registered at the federal level. These fees must be credited to the firm’s IARD website Daily Account before the Form ADV amendment can be submitted on the filing system.
RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.