In the final part of our five-part series covering common adviser deficiencies, we’re honing in on the importance of regulatory filings and the common pitfalls advisers and their firms experience.
Click here to read “RIA top deficiencies, Part 1: How to comply with the SEC Books and Records Rule”
SEC-registered advisers are required to complete applicable regulatory filings in an accurate and timely manner. The type of filings will depend on a number of factors, including a firm’s client type and the amount of assets under management.
Here are some of the most common regulatory filing deficiencies your firm needs to know – straight from the SEC.
3 Common Deficiencies with SEC Regulatory Filings (and How to Address Them)
In the SEC’s recent report, three primary deficiencies were identified regarding regulatory filings:
1. Inaccurate disclosures on your Form ADV
Form ADVs are important documents to keep up-to-date and accurate, as they’re what clients can use to better understand your fees, fiduciary responsibilities, firm size, and potential conflicts of interest. However, several advisers and firms were found to be using inaccurate disclosures, specifically on their Form ADV Part 1A and/or Part 2A brochures.
How to Get Your Disclosures Right
To stay compliant when filing Form ADV disclosures, we recommend that you:
- Gather all necessary information beforehand, especially for items requiring verification or legal review.
- Thoroughly read the instructions and relevant SEC rules.
- Assign clear roles and responsibilities for data collection, drafting, review, and filing.
- Proofread and review the entire form before submitting it to ensure all information is accurate, complete, and consistent.
Remember, transparency and honesty are key, and using technology tools or seeking professional help when needed can ensure a smooth process. Remind your team that Form ADV disclosures provide necessary insights on a firm’s fee structure, assets under management (“AUM”), and other relevant firm information. With that information in hand, clients can make more informed decisions about who they want to work with and in what capacity.
Note: There should be consistency between what is disclosed in the Part 1 and Part 2 (both A&B) of this form.
2. Amendments to your Form ADV
Along the same lines, the SEC observed advisers neglecting to update their Form ADV within 90 days of the fiscal year-end or promptly when certain information became inaccurate. To be clear, material changes are required to be made “promptly” (generally within thirty days), when the ADV becomes materially inaccurate.
Here are a few instances in which the Form ADV needs to be updated, but firms are often failing to take action in a timely manner:
- “You are adding or removing a relying adviser as part of your umbrella registration.”
- “The information you provided in response to Items 1 (except 1.O. and Section 1.F. of Schedule D), 3, 9 (except 9.A.(2), 9.B.(2), 9.E., and 9.F.), or 11 of Part 1A or Items 1, 2.A. through 2.F., or 2.I. of Part 1B or Sections 1 or 3 of Schedule R becomes inaccurate in any way.”
- “The information you provided in response to Items 4, 8, or 10 of Part 1A, or Item 2.G. of Part 1B, or Section 4 of Schedule R becomes materially inaccurate; or information you provided in your brochure becomes materially inaccurate (with exceptions).”
Please note: The instances above are not all-encompassing, but merely examples of times when Form ADV would require updates.
How to Get Your Form ADV Amendments Right
Under the Advisers Act of 1940, Rule 204-1 requires advisers to file amendments to their Form ADVs annually, within 90 days of the end of the firm’s fiscal year (for most advisers, year-end is December 31).
As a good rule of thumb, revisit your Form ADV and review it for accuracy anytime your firm experiences a major change, such as growing your AUM substantially, adding or removing advisers, or taking on a new type of client.
Note: Exempt Reporting advisers (ERAs) are required to file a Form ADV, though their specific requirements and deadlines for filing amendments may differ from non-exempt investment professionals.
3. Incorrect or untimely form filings
Form PFs and Form Ds also include strict time requirements on when amendments or initial filings must be made. The SEC regularly finds that advisers and firms struggle to meet these deadlines or do not accurately complete the appropriate filing following a triggering event.
How to Get Your Filings Right
To avoid untimely filings, it’s important to know the specific deadlines and trigger events behind filing rules:
For example, Rule 204(b)-1 states that qualifying advisers are required to file a Form PF within 60 days of the end of a fiscal quarter in which a qualifying triggering event has occurred. What qualifies as a triggering event will vary based on the type of adviser, but examples include:
- The investors elect to terminate the fund
- The investors elect to remove a general partner
- An adviser initiates a secondary transaction
In addition, hedge fund advisers are subject to a 72-hour reporting window, during which time they must file a Form PF immediately following certain significant events that may broadly impact investors.
On the other hand, firms who are not SEC-registered and have sold securities must file a Form D notice within 15 days of their first sale.
Note: Form Ds are commonly filed by advisers on behalf of their private fund clients following the first sale of securities within the private fund’s offerings.
By being aware of the common deficiencies surrounding compliance filings, your firm is better prepared to navigate filings successfully throughout 2024 and beyond.
Need Help Navigating the Regulatory Filing Process?
From Form PF to Form 13F, your regulatory filings are crucial to maintaining compliance. Inaccurate or late filings can result in penalties. Whether your firm is large or small, the time commitment for accurate filings can be significant.
That’s where COMPLY comes in. With COMPLY, you can streamline the process and free your team from filing burdens. We ensure easy and accurate filings, giving you peace of mind and saving you valuable time.
Here’s how COMPLY can specifically help with Form ADV:
- Streamlined filing process: We simplify the preparation and submission of these forms.
- Accuracy assurance: Our experts ensure your filings meet all SEC requirements.
- Time-saving solutions: We free your team to focus on core business activities.
Avoid the stress and potential penalties of late or inaccurate filings. Let COMPLY handle your Form ADV needs. Are you ready? Let’s talk!