Compliance Programs | Investment Advisers Act | Regulatory Filings

Investment Advisers To-Do list for 2017

to-do-listWith the help of Andrea Bova and Jill Grenda, my compliance colleagues at Hardin Compliance Consulting, we have compiled a list of SEC regulatory requirements for investment advisers. This is not intended to be an exhaustive list, but it should help compliance officers set up their regulatory calendars for 2017.

January 10, 2017

Form 13H: Form 13H (large trader) quarterly filing for Q4 2016 is due for advisers that already have a Form 13H filing obligation and have changes to any of the information reported.

January 15, 2017

Form PF for Large Liquidity Fund Advisers: Large liquidity fund advisers must file Form PF with the SEC on the IARD system within 15 days of each fiscal quarter end.

February 14, 2017

Form 13F: Form 13F (institutional manager) quarterly filing for Q4 2016 is due within 45 days after the end of the calendar quarter.

Form 13H: Form 13H (large trader) annual filing is due for advisers that already have a Form 13H filing obligation.

Form 13D & 13G: Annual amendments are due for advisers that have changes to disclosure information on previously filed 13D or 13G forms.

Form PR: Form PR is required to be filed with the National Futures Association (“NFA”) for registered Commodity Trading Advisors. The Form PR report for the year ended December 31, 2015 must be filed electronically using NFA’s EasyFile System.

March 1, 2017

Form PF for Large Hedge Fund Advisers: Large hedge fund advisers must file Form PF within 60 days of each quarter end on the IARD system.

Initial Form PF Filing for Large Hedge Fund Advisers that have reached $1.5 billion: Large hedge fund advisers with greater than $1.5 billion in regulatory assets under management (“RAUM”) attributable to hedge funds as of December 31, 2016 must make initial filing (the initial quarterly Form PF filing is due within 60 days of quarter end if an adviser’s hedge fund RAUM exceeds $1.5 billion as of the previous quarter end).

CPO and CTA Exemptions: Firms that claimed exemptions from Commodity Pool Operator (“CPO”) registration under CFTC Rule 4.5 or CTFC Rule 4.13(a)(3) (the “de minimis exemption”), or Rules 4.13(a)(1), 4.13(a)(2), 4.13(a)(5), and firms that claimed an exemption from Commodity Trading Adviser (“CTA”) registration pursuant to CFTC Rule 4.14(a)(8) must re-affirm those exemptions by March 1, 2017 or those exemptions will be automatically withdrawn.

CFTC CPO-PQR Form (All Schedules): Large Commodity Pool Operator Form CPO-PQR required to be filed with the NFA for Commodity Pool Operators.
IARD Fees: SEC-registered advisers and exempt reporting advisers are required to pay IARD fees before the submission of the Form ADV annual amendment (by March 31, 2017).

March 31, 2017

Form ADV Annual Updating Amendment: Existing registered advisers must update their Form ADV within 90 days of their fiscal year end (Forms 1A and 2A). The filing fee has to be deposited into the adviser’s IARD account before the filing can be submitted. The due date for 2017 is March 31, 2017.

Form ADV Part 2B: Registered investment advisers should review their Form ADV Part 2B Brochure Supplements to ensure continued accuracy.

Exempt Reporting Advisers Form ADV Filing: Exempt Reporting Advisers (i.e., exempt private funds advisers and venture capital advisers) need to update Form ADV Part 1A.

NFA Form CPO-PQR – Small and Mid-Sized Commodity Pool Operators are required to file NFA Form CPO-PQR.

CFTC Form CPO-PQR – Small and Mid-Sized Commodity Pool Operators are required to file their year-end reports with the NFA on Form CPO-PQR by March 31, 2017. Small Commodity Pool Operators are required to file Schedule A of CFTC Form CPO-PQR, Mid-Sized Commodity Pool Operators are required to file Schedule A and Schedule B.

State Filings: A registered investment adviser and an exempt reporting adviser may be required to make a state notice filing in any state in which an adviser has a specified number of clients, called “Notice Filings.” Notice filings may be made on Form ADV by checking the relevant box in Part 1A and depositing the appropriate state fees into the adviser’s IARD account. Exempt reporting advisers may also be required to register as an investment adviser in some states. Notice filing and investment adviser registration requirements differ from state to state. Each adviser should check the requirements for any relevant state in which it operates or has clients.

April 1, 2017

ERISA Schedule C of Form 5500 Disclosure: An adviser may be required to report certain information to its ERISA plan clients and investors for their use in completing Department of Labor Form 5500, including information about compensation received with respect to ERISA plan assets that the adviser manages or that are invested in the adviser’s funds. If you have ERISA plan clients, we recommend that you file this disclosure in April as ERISA plan clients have to file Form 5500 by July 31, 2017.

Form PF Filing Fee: Advisers required to file Form PF by April 29, 2017 should ensure IARD filing fees have been paid before filing is due (May 1).

April 10, 2017

Form 13H: Form 13H (large trader) quarterly filing is due for Q1 2017 for advisers that already have a Form 13H filing obligation and have changes to any of the information reported.

April 15, 2017

Form PF for Large Liquidity Fund Advisers: Large liquidity Fund advisers must file Form PF with the SEC on the IARD system within 15 days of each fiscal quarter end.

April 30, 2017

Form ADV Part 2A Delivery: (120 days after SEC-Registered Adviser’s Fiscal Year End) Registered investment advisers that have made material changes to Form ADV Part 2A are required to deliver to each client either an updated Form ADV Part 2A that includes a summary of material changes (or is accompanied by such a summary) or a summary of material changes with an offer to provide a copy of the updated 2A and information on how to obtain the Form ADV Part 2A.

Distribute Audited Financial Statements for Private Funds: Private fund investment advisers should have their funds audited by an independent, PCAOB-registered accountant and provide audited financial statements of their funds, prepared in accordance with U.S. generally accepted accounting principles, to the funds’ investors within 120 days of the end of the funds’ fiscal year (for funds with December 31, 2016 year-end, the date is April 30, 2017). Investment advisers that do not have their private funds audited should determine whether they are deemed to have custody of those funds’ assets and therefore are subject to an annual surprise audit and other requirements.

Note:  The deadline for private funds that are fund of funds is 180 days of the funds’ fiscal year end. (June 29, 2017 for funds with December 31, 2016 year-end.)

May 1, 2017

Form PF: Initial Form PF filing is due within 120 days of fiscal year-end for private fund advisers that are not Large Hedge Fund Advisers or Large Liquidity Fund Advisers and manage more than $150 million in regulatory assets under management attributable to private funds as of December 31, 2016.

Form PF Annual Amendment: Form PF Annual Amendment is due within 120 days of fiscal year-end for private fund advisers that are not Large Hedge Fund Advisers or Large Liquidity Fund Advisers and manage more than $150 million in regulatory assets under management attributable to private funds.

May 15, 2017

Form 13F: Form 13F quarterly filing is due for Q1 2017 within 45 days after the end of the calendar quarter.

May 30, 2017

Form PF for Large Hedge Fund Advisers: Large hedge fund advisers must file Form PF within 60 days of each quarter end on the IARDsystem.

CFTC CPO-PQR Form: Large Commodity Pool Operator Form CPO-PQR (March 31 quarter-end report) required to be filed with the NFA for Commodity Pool Operators.

NFA Form CPO-PQR – Small and Mid-Sized Commodity Pool Operators are required to file NFA Form CPO-PQR.

July 10, 2017

Form 13H: Form 13H (large trader) quarterly filing is due for Q2 2017 for advisers that already have a Form 13H filing obligation and have changes to any of the information reported.

July 15, 2017

Form PF for Large Liquidity Fund Advisers: Large liquidity fund advisers must file Form PF with the SEC on the IARD system within 15 days of each fiscal quarter end.

August 14, 2017

Form 13F: 13F Quarterly Filing for Q2 2017 within 45 days after the end of the calendar quarter.

August 29, 2017

Form PF for Large Hedge Fund Advisers: Large hedge fund advisers must file Form PF within 60 days of each quarter end on the IARDsystem.

CFTC CPO-PQR Form: Large Commodity Pool Operator Form CPO-PQR (June 30 quarter-end report) required to be filed with the NFA for Commodity Pool Operators.

NFA Form CPO-PQR – Small and Mid-Sized Commodity Pool Operators are required to file NFA Form CPO-PQR.

October 10, 2017

Form 13H: Form 13H (large trader) quarterly filing for Q3 2017 required for advisers that already have a Form 13H filing obligation and have changes to any of the information reported.

October 15, 2017

Form PF for Large Liquidity Fund Advisers: Large liquidity fund advisers must file Form PF with the SEC on the IARD system within 15 days of each fiscal quarter end.

November 14, 2017

Form 13F: 13F Quarterly Filing for Q3 2017 is due within 45 days after the end of the calendar quarter.

November 29, 2017

Form PF for Large Hedge Fund Advisers: Large hedge fund advisers must file Form PF within 60 days of each quarter end on the IARDsystem.

CFTC CPO-PQR Form: Large Commodity Pool Operator Form CPO-PQR (September 30 quarter-end report) required to be filed with the NFA for Commodity Pool Operators.

NFA Form CPO-PQR: Small and Mid-Sized Commodity Pool Operators are required to file NFA Form CPO-PQR.

General and On-Going Obligations: 

ADV Part 1: Investment advisers must amend Part 1 of their Form ADV promptly during the year if certain information becomes materially inaccurate, unless the inaccuracies result solely from changes in the amount of client assets managed or changes to the fee schedule. Any amendments made after October 1, 2017 will be subject to the new requirements under the Uniform Application for Investment Adviser Registration.

ADV Part 2A: An investment adviser registered with the SEC must provide to a client before or at the time of entering into an advisory agreement with the client. Update 2A promptly (and file) whenever any information becomes materially inaccurate; except no update is required in between annual amendments solely to change amount of client assets or fee schedule. Deliver interim amendments if amendment includes disciplinary information (Item 9). Under the adviser’s ongoing fiduciary obligation, disclose material changes that do not trigger delivery, i.e., material changes other than to disciplinary information between annual updating amendments.

ADV Part 2B: If an adviser is required to deliver a Form ADV Part 2B, that document should be prepared for certain supervised persons providing advisory services to clients. Advisers are required to deliver all relevant Form ADV Part 2Bs before or at the time the supervised person begins to provide advisory services to the client. Advisers are also required to deliver any newly relevant Part 2Bs to existing clients. Update 2Bs promptly whenever any information becomes materially inaccurate. For example, if the members of an investment team change, then the Form ADV Part 2B must be updated. Advisers are required to deliver updates to Part 2Bs that amend disciplinary information (Item 3). Under the adviser’s ongoing fiduciary obligation, advisers should disclose material changes that do not trigger delivery, i.e., material changes other than to disciplinary information, between annual updating amendments.

Updates to Form U-4:  Investment Advisers Representatives (IARs) are also required to amend their Form U-4 promptly following any material changes or events that occur.  “Promptly” means within 30 days of the material change.  Firms should periodically check with their IARs to request whether changes are required.  IARs must update their U4 for changes in home address or place of business; employment status; adding or removing jurisdictions; other business activities; and changes such as new or lapsed designations.   Amendments are also required to disclose other business activities and certain legal or regulatory actions, such as criminal convictions, regulatory disciplinary actions, civil actions and judgments, customer complaints, arbitrations, terminations and financial matters (such as tax liens and bankruptcy filings).  Amendments must be filed electronically to update the inaccurate data on Form U4. The filing firm must retain a copy, with original signatures, of the initial Form U4 and amendments to Disclosure Reporting Pages (DRPs).

Schedule 13G/13D/Section 16 Filings:  A person that has direct or indirect beneficial ownership of more than 5% of the outstanding voting equity securities of a U.S. public company is required to file Schedule 13D, or Schedule 13G, if eligible, with the SEC.  Advisers should monitor holdings for any filings that may be required on Schedule 13G or 13D or under Section 16 pf the Securities Exchange Act of 1034. “Beneficial ownership” is defined to include the direct or indirect power to (i) vote the securities; or (ii) exercise investment authority over the securities, including the right to acquire the securities within 60 days (such as through the exercise of an option or a convertible security). Under this definition, “beneficial owners” may include a private fund, its investment adviser and certain controlling persons and/or parent companies of the investment adviser.

Advisers are required to file Schedules 13G or 13D when they directly or indirectly acquires beneficial ownership of more than 5 percent of a class of equity securities.  Schedule 13G is an optional short-form beneficial ownership statement for certain persons subject to Section 13(d) and as a mandatory disclosure statement for persons subject to Section 13(g). The categories of persons eligible to file on Schedule 13G are a qualified institutional investor pursuant to Rule 13d-1(b), a passive investor pursuant to Rule 13d-1(c), and an exempt investor pursuant to Rule 13d-1(d).

Registered investment advisors are considered qualified institutional investors and more likely subject to Section 13(g) as opposed to Section 13(d). Schedule 13G may only be used if the registered investment advisor holds the securities due to its normal course of business and not to affect change or influence control of the issuer (i.e. a passive investor). If a registered investment advisor intends to affect or influence control of the issuer, the more stringent Section 13(d) requirements apply.

An initial Schedule 13G must be filed through the SEC’s EDGAR system within 45 days after the end of the calendar year when the registered investment advisor attains more than 5% beneficial ownership. If a registered investment advisor attains more than 10% beneficial ownership prior to the end of the calendar year, the initial Schedule 13G must be filed within 10 days after the end of the first month in which beneficial ownership exceeds 10% as computed on the last day of the month.

Amendments to Schedule 13G must be filed annually when there are changes. However, if the initial Schedule 13G reports ownership of more than 5% and the registered investment advisor exceeds 10% prior to the end of the year, an amendment must be filed 10 days after the month in which beneficial ownership exceeds 10%, as computed on the last day of the month. Thereafter, the registered investment advisor must file an amendment within 10 days after the month when ownership decreases or increases by 5%. Once an amendment has been filed showing change of ownership below 5%, no additional filings are needed.

The due date for filing for the beneficial ownership statement depends on the category of the initial Schedule 13G filer:

Passive Investor 13d-1(c) Within 10 days of the acquisition of more than 5 percent but less than 20 percent.
Qualified Institutional Investor 13d-1(b) Within 45 days of the end of the calendar year in which the beneficial owner acquired more than 5 percent and within 10 days of the end of the calendar month in which the beneficial owner acquired more than 10 percent.
Exempt Investor 13d-1(d) Within 45 days of the end of the calendar year in which the beneficial owner acquired more than 5 percent.

 

Form 13H: “Large trader report” must be filed for traders of U.S.-listed equities trading 2 million shares or $20 million on any day or 20 million shares or $200 million in any month. Advisers should monitor trading and file initial Form 13H no later than 10 days after reaching the threshold level. Advisers are required to amend promptly each quarter if there are any changes to report. Annual filing date is 45 days after the end of each full calendar year.

Advisers to ERISA Plans: Disclosure of Reasonable Contract or Arrangement under Section 408(b)(2) to ERISA plan clients. The Department of Labor requires investment advisers and other service providers to provide advance disclosures to ERISA plans concerning their services and compensation, both direct and indirect. Advisers entering into new contracts with covered plans must provide the disclosure before the contract is executed. Advisers must disclose any changes to information in the initial disclosures no later than 60 days after learning of the change.

TIC Form SLT: (Aggregate Holdings of Long-Term Securities by U.S. and Foreign Residents)
A private fund manager must file Form SLT on behalf of each U.S. entity it manages if, as of the end of a calendar month, the aggregate GAAP fair market value of the following equals or exceeds $1 billion:

  • all partnership interests held by non-U.S. limited partners in its U.S. partnerships, plus
  • all investments held by its U.S. partnerships representing less than 10% of the voting securities of a non-U.S. portfolio company, plus
  • all long-term debt (more than one year maturity) held by its U.S. partnerships of a non-U.S. portfolio company.

In general, a private fund manager does not need to report (1) securities held in third-party accounts it manages, (2) co-investments made by its funds’ limited partners, or (3) on behalf of any non-U.S. partnerships it manages.  For example, if a U.S. resident fund holds $500 million of foreign long-term securities and a foreign investor holds a $500 million interest in the U.S. resident fund, a Form SLT reporting obligation would be triggered for the U.S. resident fund (or fund manager). Form SLT must be filed no later than the 23rd calendar day of the month following the report as-of date. Form SLT applies to all U.S.-resident custodians (including U.S.-resident banks), U.S.-resident issuers (such as a U.S. fund) and U.S.-resident end-investors (such as a U.S. investment adviser, whether or not registered).

Annual Obligations:

Annual Compliance Review

It is generally considered a best practice to complete the annual compliance review by the end of the first quarter or early in the second quarter of the year (but not absolutely required). Investment advisers should review their compliance policies, code of ethics and overall program. Under Rule 206(4)-7 of the Advisers Act of 1940, the annual review should address, at a minimum:

  • Conflicts of interest, including discussion of side letters and performance fees
  • Portfolio management (including best execution, valuation and trade allocation practices and procedures)
  • Internal violations and changes to policies and procedures
  • Code of Ethics and personal trading activities of access persons
  • Trading and Investment Restrictions
  • Business Continuity/Disaster Recovery
  • ERISA (ensure appropriate disclosures have been provided, and testing of ownership percentages of benefit plan investors in funds)
  • Advertising and marketing, focusing on presentation of performance data and ensuring accuracy
  • Changes to the firm’s business and operations that result in changes to policies and procedures
  • Social Media policies and procedures
  • Accurate creation and maintenance of required records
  • Cybersecurity

Privacy Policy Delivery

Each investment adviser is required to provide its clients with a privacy notice describing the adviser’s policies regarding its disclosure of clients’ non-public personal information. It must be provided at the time the client relationship is established, and on an annual basis, unless the exemption discussed below applies.

Advisers that (1) do not share nonpublic personal information with nonaffiliated third parties (other than as permitted under certain enumerated exceptions, e.g., to service providers who perform services on behalf of the financial institution, or as necessary to administer a transaction requested or authorized by an individual); and (2) have made no changes to their privacy policies since the last time the policy was sent out, do not have to provide the annual privacy notice. Importantly, however, investment advisers and private funds must still provide an initial privacy policy notice to an individual investor at the time of establishing the relationship with the investor, i.e., in subscription documents or other similar offering documents.

The SEC provides a safe harbor for an adviser to meet its disclosure obligations under Regulation S-P by using the SEC’s 2011 Model Form. Advisers should consider whether to replace their existing privacy notices with the Model Form to take advantage of this safe harbor.

New Issues Rule – Annual Verification

Advisers investing in new issues should contact their clients and investors to verify their eligibility to invest in new issues under FINRA Rules 5130 and Rule 5131. An investment adviser that acquires initial public offerings for a fund or separately managed client account must obtain written representation initially and reaffirm every 12 months from the fund or the account’s beneficial owner confirming their eligibility status (“restricted” or “non- restricted”) to participate in new issues. This annual reaffirmation may be obtained through “negative consent” letters.

State Notice Filings/Investment Adviser Representatives

When taking on clients in a state where the adviser has not previously had any clients or business, the adviser should review that new state’s notice and registration requirements to determine whether it needs to make any new notice filings via IARD. In addition, the adviser should determine whether any of its personnel need to be registered as “investment adviser representatives” in any state and, if so, register such persons or renew their registrations with the applicable states.

Section 16 Filings

Individuals or entities that beneficially own ten percent of any class of equity securities registered under Section 12 of the Exchange Act, and officers or directors of the issuers of these securities, may be required to file Forms 3, 4, and 5 regarding their ownership of and transactions in these securities.

Blue Sky Filings/Form D

Many state securities “blue sky” filings expire on a periodic basis and must be renewed. Review blue sky filings for funds to determine whether any updated filings or additional filings are necessary. Form D filings for continuous offerings are required to be amended with the SEC on an annual basis based upon the original Form D file date (i.e. if the initial file date is December 1, 2016 then the annual update will be required by to be filed with the SEC by December 1, 2017).

 

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