SEC Addresses Adviser Questions About Form ADV, IARD

SEC Addresses Adviser Questions About Form ADV, IARD

Form ADV

If your firm has ever come across an unusual or unclear situation concerning Form ADV, you’re not alone. Far from it. The Securities and Exchange Commission’s (SEC) Division of Investment Management (“the Division”) has fielded numerous queries related to Form ADV – and the Division’s staff has put those questions to use by providing and publishing answers for the public’s reference.

The result is a frequently asked questions (FAQ) page covering a multitude of issues about both Form ADV and the SEC-sponsored Investment Adviser Registration Depository (IARD) electronic filing system.

You can read the full list of questions here, but the following are some key questions that many advisers will find particularly useful.

Q: What are the fees for advisers registering/registered with the SEC filing on IARD? 

A: The Division’s staff notes that fees are charged based on your firm’s assets under management (AUM).

Initial Registration and Annual Updating Amendment fees are:

  • $40 for firms with less than $25 million in AUM
  • $150 for firms with $25 million to $100 million in AUM
  • $225 for firms with more than $100 million in AUM

Fees are not charged for filing an electronic amendment to Form ADV (unless it is an Annual Updating Amendment), and fees are not charged for electronic filing of Form ADV-W or Form ADV-E.

Q: What is the review process for approving a new request for investment adviser registration with the SEC? I submitted my firm’s registration through IARD, but when will it be displayed on the IARD Public Disclosure website?

A: Within 45 days, the SEC will respond to an initial registration request by either granting the registration by order or beginning proceedings to determine whether registration should be denied. If the adviser’s registration is approved and not already displayed on the IAPD website, they typically will be included on the site on the next business day. If the SEC staff determines an adviser hasn’t supplied all necessary info, they’ll notify the adviser within 45 days by phone or email. A new 45-day period will begin when the adviser resubmits Form ADV.

Q: Does an adviser have to report the address of an account on a publicly available social media platform where an unaffiliated third-party distributor or solicitor controls the content?

A: No. An adviser should not provide the address of websites or accounts on publicly available social media platforms where the adviser does not control the content. The account should only be promoted if it is both used to promote the business of an adviser registered with the Commission and the adviser controls the content.

Q: My firm’s chief compliance officer (CCO) provides chief compliance officer services to my firm and two other firms. Those two other firms employ and compensate the CCO for the services provided to their respective firms and not for the services provided to my firm. What should my firm answer for Item 1.J.(2)?

A: Leave Item 1.J.(2) blank. You only need to provide information for Item 1.J.(2) in the event another person employs or compensates your CCO for providing CCO services to your firm.

Q: Items 5.C.(1) and 5.D ask about the number of clients I have. For the purposes of these questions, should I report advisory clients for whom I do not have regulatory assets under management?

A: Yes. If an adviser provides investment advisory services for a client, even if the client does not have regulatory assets under management, the adviser should include that client in the responses to both Items. Advisers also must count clients who do not compensate the adviser. They do not have to count clients who are not investment advisory clients.

Q: If I provide automated advice, should I report that I provide “robo-advice” or “robo-services” by selecting the “Other” category [in Form ADV: Item 5.G]?

A: No, but only if your sole reason for selecting “Other” is because you provide automated advice. The Division’s staff views automated advice as a means of providing an advisory service, not as a separate type of advisory service.

Q: What is Form ADV-E used for?

A: Advisers and independent public accountants use Form ADV-E to file a certificate of accounting (aka “surprise examination report”) for advisers that have custody of client funds or securities. This is done to comply with rule 206(4)-2 or other similar state rules.

Q: How do I determine which indirect owners must be listed on Schedule B?

A: An adviser must list indirect owners who own 25% or more of a direct owner, which the SEC’s staff refers to in this answer as “first-level” indirect ownership. If any person owns 25% or more of that indirect owner, this is considered a “second-level” indirect owner and they too must be listed. At each level, if an indirect owner owns 25% or more, they must be listed. Stop at whatever point you reach a public company.

If you need further clarification on any of the SEC’s FAQs or any other compliance matters, ACC is here to help. Please don’t hesitate to contact us.