Amendments to Form ADV and the Books and Records Rule

Jul 23, 2017

| Interval Funds / Alternative Funds | Managed Account Platforms | Registered Funds

An investment adviser filing an initial Form ADV or an amendment to an existing Form ADV on or after October 1, 2017 will be required to use a revised Form ADV. (Changes to Form ADV can be found here: Additionally, amendments to Rule 204-2 (the “Books and Records Rule”) of the Investment Advisers Act of 1940 will apply to communications circulated or distributed after October 1, 2017.

Amendments to Form ADV will require an adviser to provide additional information regarding its advisory business, including information regarding its separately managed account business, other offices, and social media accounts for which the adviser is able to control the content associated with the account (e.g., Facebook, Twitter and LinkedIn). The amended Form ADV will also create an “umbrella registration” on a single Form ADV (within a new Schedule R) for multiple private fund adviser entities operating a single advisory business under certain conditions.

In addition, amendments to the Books and Records Rule will modify recordkeeping obligations as to certain materials relating to an adviser’s performance or rate of return. For example, the amended rule will require advisers to maintain materials that demonstrate the calculation of performance or rate of return in any communication circulated or distributed directly or indirectly to “any person” rather than to “10 or more persons” as the rule currently requires. These amendments considerably expand the scope of the Books and Records Rule to encompass all performance related communications, including but not limited to custom calculations requested by a single investor or potential investor. Additionally, advisers will now be required to retain original copies of all written communications related to performance or rate of return that are sent to or received from any third party.

All advisers are encouraged to promptly review their current operational practices and determine what modifications, if any, will be necessary to ensure continued compliance with all applicable regulations.

The Final rule can be found here:

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