State Registered Investment Advisers Need to be Aware of Newly Released Revisions to Part 1B of Form ADV

December 19, 2012

On October 29, 2012, the North American Securities Administrators Associations (“NASAA”) approved revisions to Part 1B of the Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Advisers (“Form ADV”). Investment advisers registering with one or more state securities regulators are required to complete Form ADV Part 1B. Additionally, state-registered investment advisers making an annual updating amendment or an other-than-annual amendment to an existing registration will be required to use the revised Form ADV Part 1B. According to NASSA, “As the majority of state-registered investment advisers have a December 31, 2012 fiscal year-end, and therefore are required to make their annual updating amendment filings by March 30, 2013, in accordance with the instructions in Form ADV, we expect that the majority of state-registered investment advisers will be filing the revised Form ADV Part 1B in the first quarter of 2013.”

For reference, NASAA has released a redline Form ADV Part 1B offering a comparison to the previous Form ADV Part 1B. A summary of the changes made includes revisions to Items 2.A., 2.C., 2.D., 2.G., 2.I., 2.K. and Disclosure Reporting Pages (“DRPs”). Below are some of the specific edits made to the Form ADV Part 1B:

  • Item 2.A.: Item 2.A. is now only required to be completed if the person responsible for supervision and compliance does not appear in Item 1J or 1K of Form ADV Part 1A.
  • Item 2.C.: Edited to include “any advisory affiliate, or any management person” to the question presented. Item 2.C. now reads: “Has a bonding company ever denied, paid out on, or revoked a bond for you, any advisory affiliate, or any management person?”
  • Item 2.D.: Edited to include “any advisory affiliate, or any management person” to the question presented. Item 2.D. now reads: “Are there any unsatisfied judgments or liens against you, any advisory affiliate, or any management person?”
  • Item 2.G.(1): Edited to omit outside business activities as an Attorney or Certified Public Accountant. Edited to include outside business activities of “Issuer of Securities,” “Sponsor or syndicator of limited partnerships (or equivalent), excluding pooled investment vehicles,” “Sponsor, general partner, managing member (or equivalent) of pooled investment vehicles” and “Real estate adviser.”
  • Item 2.G.(2): Edited to include “any advisory affiliate, or management person” to the question. Item 2.G.(2) now reads: “If you, any advisory affiliate, or management person are actively engaged in any business other than those listed in Item 6.A. of Part 1A or Item 2.G.(1) of Part 1B, describe the business and the approximate amount of time spent on that business.”
  • Item 2.I.(1): Edited to include the addition of a title. Item 2.1.(I) is now titled: “Advisory Fees.”
  • Item 2.I.(2): Edited to expand the scope of Pooled Investment Vehicles and Trusts. The question, now titled under “Pooled Investment Vehicles and Trusts” reads: “(a)(i) Do you or a related person act as general partner, managing member or person serving in similar capacity, for any pooled investment vehicle for which you are the adviser to the pooled investment vehicle, or for which you are the adviser to one or more of the investors in the pooled vehicle?” If the answer to 2.I.(2)(a)(i) is “yes” clarification will be requested under (a)(ii).
  • Item 2.I.(2)(b): Additional question added, which reads: “Do you or a related person act as investment adviser and a trustee for any trust, or act as trustee for any trust in which your advisory clients are beneficiaries of the trust?
  • Item 2.K.: Item added to request information if the investment adviser is an organization other than a sole proprietorship.

Remaining changes include edits to the Bonding Disclosure Reporting Page, Judgment/Lien Disclosure Reporting Page and to the Arbitration Disclosure Reporting Page. If the investment adviser is registered with one or more state securities regulators and, therefore, is required to complete the Form ADV Part 1B when preparing the Form ADV annual amendment, the investment adviser needs to make sure it carefully reviews all items in the Form ADV Part 1B to make sure all information is current and accurate and that all newly requested information has been completed before the investment adviser submits its annual amendment.

If your registered investment adviser would like assistance completing this year’s Form ADV annual updating amendment, please contact your consultant if you are an existing client. If your investment adviser has not previously worked with RIA Compliance Consultants, please click here to schedule a time to speak to one of our consultants about how RIA Compliance Consultants can assist your registered investment adviser.

Additionally, for more information on preparing and filing your investment adviser’s Form ADV annual amendment, register to attend our upcoming webinar, “Preparing Your Form ADV Annual Amendment,” that will be presented by RIA Compliance Consultants on January 10, 2013, at 12:00pm CST. The registration fee for this webinar is $69.95. During this webinar, RIA Compliance Consultants will discuss the items that must be updated as part of the Form ADV Part 1 Annual Amendment. We will also review common mistakes made by registered investment advisers when preparing the Form ADV Part 1 Annual Amendment. To register for this event, click here.

Posted by Bryan Hill
Labels: Annual Amendment, Form ADV, Registration