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Markets and Securities Services |
United States
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Chief compliance officer outsourcing
Currently, advisers are required to provide the
name and contact information of the adviser’s
CCO. The Final Rule now also requires an
adviser to report whether or not its CCO is
compensated or employed by any person other
than the adviser (or a related person of the
adviser) for providing chief compliance officer
services to the adviser. If applicable, the adviser
would be required to disclose the name and
IRS Employer Identification Number (if any) of
that service provider. However, advisers are not
required to disclose the identity of a related
person of the adviser or the identity of another
person compensating or employing the CCO, if
such other person is an investment company
registered under the Investment Company Act
of 1940 and is advised by the adviser.
Additional information about advisory business
The Final Rule amends Form ADV to require
more specific information about the amount
and proportion of an adviser’s RAUM by client
type. As a result of the Final Rule, advisers are
required to report the number (rather than
percentage) of clients and the amount (rather
than percentage) of RAUM attributable to each
category of client. Notably, advisers with fewer
than five clients in a particular category need not
disclose the actual number of clients, and can
instead check a box indicating that they service
fewer than five of a particular client type.
Currently, an adviser must disclose the number
(in the form of a range) of clients to whom the
adviser provided advisory services during the
most recent fiscal year. Instead, the Final Rule
requires advisers to disclose the number of
clients the adviser provided advisory services
to,
but for whom the adviser did not manage
regulatory assets
, such as non-discretionary
accounts or one-time financial plans.
An adviser is also required to report the
percentage of its clients that are non-US persons.
Under this reporting regime, an adviser could
report a high percentage of clients that are non-
US persons even though the RAUM attributable to
those clients makes up only a small percentage of
the adviser’s overall RAUM. To better understand
the adviser’s relationship with non-US clients, the
Final Rule requires reporting the approximate
amount of an adviser’s total RAUM attributable
to clients that are non-US persons. As a result, a
foreign adviser registering with the SEC, but with
a principal place of business outside the US, would
be required to report information pertaining to the
non-US portion of its business.
The Final Rule requires an adviser to report
RAUM of all “parallel managed accounts”
related to a registered investment company
(or series thereof) or business development
company advised by the adviser.
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The SEC
noted that this information would assist the
SEC staff in addressing how an adviser manages
conflicts of interest, and also show the extent
of any shift in assets between parallel managed
accounts and registered investment companies
or business development companies.
Umbrella registration
Background
When the private adviser exemption was repealed by
the Dodd-Frank Act, advisers to private funds were
required to register under the Advisers Act.
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Tax,
legal and regulatory considerations led many private
fund advisers to organise and operate a group of
special purpose entities (SPEs) that are separate
legal entities, in order to manage the advisers’
sponsored private funds. Even though these groups
of related advisers generally operate as a single
advisory business, because each SPE could be