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Regulatory Update for March 2017

  • DOL Fiduciary Rule Status: 60 days of breathing room!  The DOL has announced a proposed extension of the applicability date from April 10 to June 9, 2017.
  • OCIE releases Top Five Exam Deficiencies: Are you ready for the SEC?  Check out OCIE’s top 5 most frequent audit deficiencies in its current Risk Alert.  Before you complete your annual review take some time to read this alert to avoid the common missteps listed like: compliance manuals not being relevant or up to date, inaccuracies on Form ADV, inadvertent custody, Code of Ethics reporting failures and inadequate Books and Records.
  • SEC issues No-Action Relief on Custody and Standing Letters of Authorization: Do you have custody of client assets?  The Investment Adviser Association (IAA) submitted a request asking whether an adviser has custody under Rule 206-(4)-2 (“Custody Rule”) of Advisers Act when acting pursuant to a standing letter of authorization (“SLOA”) with a qualified custodian.  The SEC responds with its usual lack of clarity.  The good news is that it’s possible to avoid the “surprise exam” requirement but only by following the SEC’s requirements.  Cooperation by the custodian will be required, so stay tuned for the industry’s response.  Check out our blog post for more details.
  • NY’s New Cybersecurity Regulations: New York’s Department of Financial Services (NYDFS) adopted Cybersecurity Requirements for Financial Services Companies (23 NYCRR 500), effective on March 1, 2017.  The regulation requires banks and insurers to meet minimum cyber-security standards and report breaches to regulators as part of an effort to combat a surge in cyber-crime and limit damages to consumers. The new regulation will not apply to many investment advisers, private fund managers and broker-dealers, unless they are supervised by NYDFS in some other capacity, such as an insurance broker or agent.  Nonetheless, given the increasing cybersecurity attacks on large corporations, this regulation could be the wave of the future.   Check out our blog post for a summary of this new regulation.
  • SEC issues Guidance on Robo-Advisers: The SEC issued guidance on the disclosure, suitability and compliance obligations for investment advisers that use computer algorithms to provide investment advisory services online often with limited human interaction (“robo-advisers”).  There’s really nothing new in this guidance – the SEC just wants to make sure that these advisers are providing sufficient disclosure about the algorithm that is used to develop investment advice, and the assumptions and limitations of that algorithm.  The SEC also issued an Investor Bulletin on Robo-Advisers.  This piece provides useful background on the robo-adviser business model and approach to investing.

Lessons Learned From Recent SEC Cases

If You Have Local Government Clients, Pay Attention to the Political Contributions! The SEC recently censured and fined 10 investment advisory firms for violations of Rule 206(4)-5 of the Advisers Act.    All of these advisers are now subject to a two-year time-out from receiving advisory fees because of campaign contributions made by the firms’ associates.  Check out to see if your firm’s associates have been contributing to local political campaigns.

Worth Reading

 Filing Deadlines and To Do List for March


  •  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).
  • 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. Check out the Form ADV quick reference guide here.
  • 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.
  • Form ADV Part 2B: Registered investment advisers should review their Form ADV Part 2B Brochure Supplements to ensure continued accuracy.


  • Reaffirm YOUR CPO and CTA Exemptions: Firms that claim 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 is required to be filed with the NFA for Commodity Pool Operators by Mach 1, 2017. 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, and Mid-Sized Commodity Pool Operators are required to file Schedule A and Schedule B.


  • Form PF for Large Hedge Fund Advisers must be filed within 60 days of each quarter end on the IARD system (March 1, 2017).
  • Initial Form PF: Hedge Fund Advisers that have reached $1.5 billion regulatory assets under management (“RAUM”) attributable to hedge funds as of December 31, 2016 must make initial filing (the initial quarterly Form PF filing within 60 days of quarter end if an adviser’s hedge fund RAUM exceeds $1.5 billion as of the previous quarter end).  (March 1, 2017)


Form SHC – TIC SHC Survey: The U.S. Treasury’s TIC SHC Survey is a benchmark report and is filed every five years with the Federal Reserve Bank of New York. NOTE: U.S. investment managers that have previously determined themselves to be exempt from other Treasury International Capital (TIC) reports may be required to file the TIC SHC.  The report is mandatory in the following two circumstances:

  • Entity is contacted by the Federal Reserve Bank of New York
  • Entity exceeds the reporting threshold for either Schedule 2 or 3, regardless of whether they are contacted.
    • Schedule 2 threshold: fair value of reportable foreign securities held directly by the U.S. resident reporter or by a foreign-resident custodian is at least $200 million
    • Schedule 3 threshold: fair value of reportable foreign securities held by a U.S. custodian on the reporter’s behalf is a least $200 million

The help desk from the Federal Reserve of New York said that the notification has gone out – electronically – so advisers should check to see if they received any communication from the “Federal Reserve of New York.” Remember to check junk/clutter boxes to be sure.  Due date is March 31, 2017.

Hardin Compliance Consulting provides links to other publicly-available legal and compliance websites for your convenience. These links have been selected because we believe they provide valuable information and guidance.  The information in this e-newsletter is for general guidance only.  It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting of any kind.