RIAs who try to file a routine, but required, amendment to their SEC Form ADV will quickly discover it’s no simple task anymore.
On Oct. 1 the SEC stopped accepting any amendments in most instances until firms complete the much more onerous job of filling out its new Form ADV, which includes up to hundreds of new disclosures depending on the size of the firm, says GJ King, president of compliance and software consulting firm RIA in a Box.
"This is going to put a pretty big burden on firms," King says. "For midsized firms, they need to revisit their technology infrastructure. For bigger firms, this is a significant investment."
Approved in August, the changes to the disclosure form are posted on the commission's website in red-line edits. They require advisors to report more information about their social media addresses, separately managed accounts, and outsourced compliance officers. They also must divulge much more detail on how they have invested their clients' money.
"As the SEC continues to expand its data capabilities, this gives them more data to be able to sort, analyze, rank and organize," King says.
DATA MINING SOCIAL MEDIA
With advisors' social media addresses in hand, the commission should be able to run automated keyword searches that could identify advertising violations ahead of time, he says.
"Over time, this new capability could help identify and prioritize audit targets," King says.
Smaller firms, with simpler product lines and organizational structures, may be able to pull together all that's needed to complete the new forms in just a few hours of additional work, King surmises.
However, "for larger firms that have a large number of accounts and a different type of investments, this could be a significant undertaking," he says.
Midsized firms may be forced to reorganize their own record keeping and compliance processes, according to King.
Firms should not be filling out the forms using “a manual spreadsheet,” says technology consultant Bill Winterberg. “It's about what technology can we put in your business that helps facilitate your annual ADV updates."
Given that most firms file their ADVs at the end of their fiscal year, which often is Dec. 31, King expects up to 95% of the 12,615 RIAs (as of this week) in the country will have completed and filed the new disclosures. Others with fiscal years ending later may not file their updates until as late as June, he says.
Either way, with the Oct. 1 deadline over, King warns RIAs that they "don't want to get caught off guard by this. This is not something most firms can pull together in a short amount of time.”
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access