As a hedge fund, your primary focus is on achieving desirable results for your investors, which takes an immense amount of time, strategy, and expertise. While maintaining up-to-date compliance documents and procedures may not be at the top of your to-do list, your ability to operate successfully depends on the details of your firm’s compliance program.
Why? Because in order to build trust, investors require you to have a high level of transparency and credibility – both of which stem from your compliance efforts. You’re expected to maintain and abide by a code of ethics, and neglecting to do so can damage your reputation as a firm.
As you continue maintaining and updating your hedge fund’s compliance program, let’s take a look at one of the most commonly filed compliance documents: Form ADV.
When is a Hedge Fund Required to File a Form ADV?
Form ADV is generally required for an investment manager to one or more hedge funds. Specifically, hedge fund advisers use Form ADV to register – file as an exempt reporting adviser (ERA) – with either the SEC or state securities administrators.
What Is a Form ADV?
Form ADV is an mandatory public filing that includes relevant information about your hedge fund, its fees, assets under management, disciplinary records, and more. Investors, potential investors, and others can access your Form ADV on the Investment Advisor Public Disclosure database at any time.
What Information Should a Hedge Fund’s Form ADV Include?
For a registered investment adviser (RIA), Form ADV will include a Part 1 and Part 2A, each providing relevant information for current and potential investors to consider. ERAs file only a truncated Part 1. [Part 3 of Form ADV (also known as Form CRS – the Customer Relationship Summary) is generally not required for hedge fund advisers unless the RIA is both SEC-registered and has retail clients.]
Part 1 is a more fill-in-the-blank style online filing and will require you to provide information regarding:
- Names of the owners and officers at your firm
- Affiliations with other businesses
- Previous disciplinary incidents
- Assets under management
Part 2A is significantly more time-consuming to complete, as it’s a narrative-style brochure that must be written in plain English. In addition to the Part 1 information above, Part 2A requires hedge funds disclose detailed information about:
- Advisory fees
- Investment strategies & methods of analysis
- Outside business activities & potential conflicts of interest
- Certain trading practices
- Brokerage relationships
- Referral relationships
- Proxy voting policies
What’s Different About a Form ADV for Hedge Fund Advisers?
In 2011, the SEC expanded Part 1 of Form ADV to collect additional information from hedge fund advisers, including:
- Information regarding the private funds they advise on
- More data on the advisory business itself (such as the type of clients, advisory activities, number of employees, etc.)
- Business practices that may create a significant conflict of interest
- Financial industry affiliations
Depending on who your firm is registered with (e.g., at the state level), RIAs serving hedge funds may also be required to provide advisory contracts as well as the policies and procedures manual addressing compliance throughout the firm’s day-to-day operations.
When Should Hedge Fund Advisers Update Their Form ADV?
RIAs advising hedge funds are required to file an annual updating amendment to Form ADV every year, within 90 days of the end of your fiscal year end. The SEC also requires “other-than-annual” amendments to be filed promptly under certain circumstances, such as “adding or removing a relying adviser as part of your umbrella registration” or if information previously provided becomes materially inaccurate.
How to File a Form ADV as a Hedge Fund Adviser
You are required to file your Form ADV with the SEC electronically through the Investment Adviser Registration Depository (IARD) system. State regulators also the IARD system as well, but may have ancillary requirements in addition to Form ADV. The IARD website provides detailed instructions, which you can follow to either file a new Form ADV or update your existing one.
At the outset, your first step to filing is to request an IARD Entitlement Package based on whether you’re registering with the SEC or the state. Once the package is submitted and received by the FINRA Entitlement Group, you’ll be assigned a CRD number (an identification number that’s unique to your firm), a user ID, and a password. You will use these credentials to access the IARD and file your initial Form ADV.
You are required to file electronically unless you are granted a continuing hardship exemption from the SEC or your state regulators do not require electronic filing.
Regulatory Filing with COMPLY
At COMPLY, we understand how daunting it can be to file a Form ADV – but we have you covered!
COMPLY’s Regulatory Filings services handle the entire process of filing Form ADV. We’ll help you avoid errors and ensure all parts of your Form ADV are accurate and aligned, saving you valuable time and minimizing the risk of regulatory scrutiny.
Whether you need a comprehensive filing solution or assistance with specific sections, COMPLY’s team of experts is here to help. Focus on managing your hedge fund and let COMPLY handle the complexities of regulatory compliance.
Ready to conquer regulatory filing with COMPLY? Let’s talk!