Investment Advisers Face Enhanced Information Reporting

The Securities and Exchange Commission (SEC) has recently adopted amendments to several Investment Advisers Act rules, including the investment adviser registration data collection and reporting forms to enhance the reporting and disclosure of information by Investment Advisers.  These amendments are intended to improve the quality of information that investment advisers provide to investors and the SEC.

“These amendments are an important step in a series of rule-makings to enhance the SEC’s monitoring and regulation of the asset management industry,” said SEC Chair Mary Jo White. “Requiring investment advisers to report this additional information will provide investors and the Commission with a better understanding of the risk profile of each adviser and the industry as a whole.”

The amendments will require investment advisers to provide substantially more  information regarding their separately managed account business, including the aggregate data related to their use of borrowings and derivatives in the management, and additional information about other aspects of their advisory business, including branch office operations and the use of social media in the marketing of advisory services.

The amendments will also facilitate the streamlined registration and reporting obligations for groups of private fund adviser entities that operate on a single advisory business platform.  Additionally, amendments to Investment Advisers Act Rule 204-2 will require Investment Advisers to maintain additional records related to the calculation and distribution of performance information.  It is believed that these records will be useful to the SEC’s examinations staff in evaluating adviser performance claims, and could reduce the incidence of misleading or fraudulent advertising and communications by private fund advisers, which has increased substantially in recent years.

The amendments will become effective 60 days after their publication in the Federal Register, which is anticipated to be in the near future, and investment advisers will need to begin complying with the amendments on Oct. 1, 2017.