Form ADV Amendments may Trigger Changes to Other Investment Advisory Documents

April 03, 2013

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By now, a registered investment adviser with a December fiscal year end should have filed its Form ADV annual updating amendment that is due each year within 90 days of the investment adviser’s fiscal year end. An investment adviser needs to understand that failure to update the Form ADV, as required by the Form ADV General Instructions, is a violation of U.S. Securities and Exchange Commission (“SEC”) rules and similar state rules that could lead to an investment adviser’s registration being revoked. A registered investment adviser with a fiscal year end other than December must make sure to file its annual updating amendment within 90 days of the investment adviser firm’s fiscal year end.

After an investment adviser’s Form ADV annual updating amendment is filed, an investment adviser should review its other documents to determine if the Form ADV amendments triggered the need to make changes to other documents utilized by the investment adviser, such as written policies and procedures or client contracts. For instance, if an investment adviser added or removed services in the investment adviser’s Form ADV, the investment adviser may need to update existing or develop new policies and procedures specific to the supervision of those services or to address the necessary documentation and client forms related to those services.  Another example is if there are changes to the investment adviser’s fee schedule or the way the investment adviser fee is calculated, revisions to the investment adviser’s client contract may be required to properly disclose the investment adviser’s new fees and the manner in which the fees are calculated.  Investment advisers must make sure there is consistency throughout the investment adviser’s documents.

Under Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), investment advisers registered with the SEC are required to adopt and implement written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Investment Advisers Act and the rules adopted under the Investment Advisers Act.  Additionally, SEC registered investment advisers must review their written policies and procedures at least annually for the adequacy and effectiveness of the implementation of such policies and procedures. However, in order to prevent violations from occurring, an investment adviser may need to make updates and changes more frequently in response to various compliance events, changes in an investment adviser’s business model or regulatory changes. Investment advisers registered with state securities regulators may be required to adhere to similar state regulations depending on the particular rules of the state. An investment adviser needs to be aware that the compliance manual is a living document and although SEC Rule 206(4)-7 only requires an annual assessment, SEC and state registered investment advisers should consider reviewing their written supervisory and compliance policies and procedures and making revisions or developing new supervisory and compliance policies and procedures any time a violation, deficiency or change occurs rather than waiting to do so annually.

In an effort to assist your investment adviser with efficiently updating or developing written policies and procedures, RIA Compliance Consultants has created an online tool, RIA Express-Compliance Manual Drafter, to streamline this process. Using this online tool, your investment adviser will complete a detailed questionnaire about your investment adviser’s personnel, business model, and changes in your procedures and practices. The answers to the online questionnaire will generate a customized written supervisory procedures and code of ethics manual, via our electronic compliance manual authoring wizard. By using this tool your investment adviser will be able to develop its initial written policies and procedures or an updated manual reflecting current regulations and revisions to your investment adviser’s existing policies and procedures.

The fee for this Self-Customized, Regulator Specific Manual that you prepare for your investment adviser through RIA Express – Compliance Manual Drafter is $695. To purchase this product or for more information, please visit our online store here.

If your investment adviser would like assistance making revisions or determining if revisions to any of your advisory documents are required as a result of your recent Form ADV amendments, please contact your consultant if you are an existing client or click here to schedule a time to speak to one of our Senior Compliance Consultants to see how RIA Compliance Consultants may further assist your investment adviser.

Posted by Bryan Hill
Labels: Compliance Program, Compliance Tool, Form ADV, Written Policies and Procedures