Memorandum to our Investment Management Clients and Friends
SEC-registered investment advisers (“advisers”) whose fiscal year ended on December 31, 2018, must submit an annual updating amendment (“annual amendment”) to their Form ADV by March 31, 2019.1 Below are certain tips and considerations to keep in mind as advisers prepare to file their annual amendments.
Filing Deadline
This year’s filing deadline falls on Sunday, March 31. While the SEC’s electronic filing system, the Investment Adviser Registration Depository (“IARD”), is open to accept filings on Sunday, we recommend filing at least a few days in advance of the deadline to avoid any last minute technical difficulties that may delay the submission.2
Filing Fee
IARD filing fees apply to annual amendments.3 Fees are charged based on advisers’ regulatory assets under management (“RAUM”) and must be credited to advisers’ IARD Flex-Funding Account before annual amendments can be submitted.4 We recommend advisers fund their IARD Flex-Funding Accounts well in advance of their filing date to avoid any last-minute complications regarding funding.
Maintaining Notes
Various items in Form ADV Part 1A, such as the number of clients in particular client categories in Item 5.D. or the amount of RAUM in Item 5.F., require advisers to perform calculations and make interpretive determinations. In order to be prepared for subsequent inquiries by regulators and ensure a consistent reporting methodology in the future, we recommend advisers maintain detailed notes on how they arrived at their responses to Form ADV.
Consistency between Part 1A and Part 2A
Certain topics, such as assets under management, the types of compensation received, personal trading, soft dollars, and custody are addressed in both Form ADV Part 1A and Part 2A. Advisers should ensure that they have provided consistent responses on these topics in Part 1A and Part 2A.
Summary of Material Changes
Item 2 of Form ADV Part 2A requires advisers that are amending Part 2A for their annual amendment to identify and discuss material changes from their last annual update to Part 2A. We note that Advisers must disclose all material changes since their last annual update to Part 2A, not just changes since their last other-than-annual amendment to Part 2A.
S&K Observations
The annual amendment requires a significant amount of information and disclosures and may necessitate coordination with multiple parts of an adviser other than the legal and compliance department. Many of the items in Form ADV call for interpretive determinations regarding the Form’s questions and instructions. We recommend advisers begin the process of completing their annual amendment as early as possible. Please contact your primary attorney in Seward & Kissel’s investment management group or any of the attorneys listed below for assistance with your annual amendment.
Seward & Kissel has created a “Guide to Completing Form ADV Part 1A” and a “Model Form ADV Parts 2A & 2B” to assist advisers with completing Form ADV. These documents as well as other compliance tools and resources are available on our Online Compliance Subscription Service, which is free to our active investment adviser clients. Please click here to request free client access.
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1 Similarly, SEC-exempt reporting advisers (“ERAs”) whose fiscal year ended on December 31, 2018, must amend their ERA Report by filing an annual updating amendment by March 31, 2019.
2 In addition, advisers must have annually renewed any state notice filings and paid renewal fees through the IARD Renewal Program by the renewal deadline. Our prior client alert on the 2019 IARD Renewal Deadline is available here.
3 We note that IARD’s Call Center is not available on the weekend to respond to questions related to IARD accounting or system entitlement, navigation, and usage and filing.
4 The IARD filing fee for annual amendments is $40 for advisers with RAUM of less than $25 million; $150 for advisers with RAUM of $25 million to $100 million, and $225 for advisers with RAUM of $100 million or more.
