1st December 2011
Welcome to our Winter 2011 newsletter
Happy New Year! I wish all of you a happy, healthly and very prosperous 2011.
In this newsletter I would like to share with you our perspectives on the new rules requiring non-US advisors to file reports with the SEC. I hope you find it helpful. If you would like to find out more about how we can help, please don't hesitate to contact me or any of my collaegues.
New SEC Reporting Requirements Affecting non-US Advisors
The SEC recently issued draft proposed rules implementing amendments to the Investment Advisers Act of 1940. In this article we look at the reporting obligations that will impact exempted advisers, including non-US advisors obtaining exemptions as Foreign Private Advisers and explore what can be done to expedite compliance.
It may be a surprise for some non-US advisers, who have previously obtained exemption from registration under the Act, that they may now have to file reports with the SEC. The SEC’s focus is on amending the registration document ADV, currently named “Uniform Application for Investment Adviser Registration.” The SEC’s intention is to expand the scope of this document to include a second purpose namely a “Report by Exempt Reporting Advisers”.
Practically speaking, a new subsection at the start of the current form will require advisors to identify the exemption(s) that they are relying on to report to (rather than register with) the SEC. There are three categories of exemption, the most relevant for non-US advisors likely being the “Foreign Private Advisors” exemption.
As well as being reviewed by the SEC, form ADV is a publicly disclosed document. The SEC’s website has an online Investment Advisor search facility (http://www.adviserinfo.sec.gov/)
Exempt reporting advisers should complete a limited subset of Form ADV items, focusing on baseline information about the adviser and its business, including Part 1A: Items 1 (Identifying Information), 2.C. (SEC Reporting by Exempt Reporting Advisers), 3 (Form of Organization), 6 (Other Business Activities), 7 (Financial Industry Affiliations and Private Fund Reporting), 10 (Control Persons), and 11 (Disclosure Information). Exempt reporting advisers would not have to complete Part 2 of Form ADV, the client brochure, which is required of registered advisers, providing clients and potential clients with detailed information about their qualifications, investment strategies, and business practices.
The SEC’s justification for this approach is that the US Congress gave them broad authority to require exempt reporting advisers to file reports as necessary or appropriate in the public interest or for the protection of investors. The Dodd-Frank Act does not specify the types of information, to be collected, nor defines for what purpose the SEC might use it. The SEC’s basic approach is to identify the advisers, their owners and their business models and consider whether these advisers or their activities might present sufficient concerns as to warrant their further attention in order to protect their clients, investors and other market participants. The SEC also believe the broader public interest may be served in making this information generally available.
The indicted deadline for exempt reporting advisers to file their initial ADV with the SEC is no later than August 20 2011 (30 days after the July 21 2011 effective date of the Dodd-Frank Act.)
The proposed rules are still in draft, but at Langham Hall we are already gearing up to offer services to our clients to help them fulfil their obligations. Leveraging our experience of best practices in Private Equity fund administration, we can help exempt reporting advisor’s minimize the cost and difficulties of preparing their returns.
Please don’t hesitate to get in touch with me or one of my colleagues if the topic of SEC reporting as an exempt advisor is something relevant to you or if you would like to explore our support in this area. We will be delighted to spend time with you discussing your needs.