New SEC Proposals to Enhance Information Reported by Investment Advisers and Registered Investment Companies

Posted on 06.04.15

New SEC Proposals to Enhance Information Reported by Investment Advisers and Registered Investment Companies

By Scott Hoffmann, CPA, MBA, Business Assurance & Advisory Services Supervisor, Financial Services Industry Team

On May 20, 2015, the Securities and Exchange Commission (SEC) released proposed rules for registered investment advisors (RIAs) and registered investment companies (e.g. publicly traded mutual funds and ETFs) that they claim would improve quality and accessibility of information for investors and improve regulatory monitoring. SEC Chairwoman, Mary Jo White, noted, “Investors will have better quality and greater access to information about their fund investments and investment advisers, and the SEC will have more and better information to monitor risks in the assets management industry.”

Highlights of the RIA proposals include amendments to the investment adviser registration and reporting form (Form ADV), such as:

  • Requiring aggregate information related to assets held and use for borrowings and derivatives in separately managed accounts. Approximately 73 percent of SEC-registered investment advisers manage a wide variety of client assets in separately managed accounts, which generally provide advisory clients with individualized investment advice and direct ownership of the securities and other assets in the account.
  • Permit by rule certain “umbrella registration” filing arrangements that are currently outlined in staff guidance.
  • Provide additional information about an adviser’s advisory business and including branch office operations and the use of social media.

Additional proposed amendments to Rule 204-2 of the Investment Advisers Act would require advisers to maintain records of the calculation of performance information that is distributed to any person. Currently, advisers are required to maintain performance information that is distributed to ten or more persons. The proposed amendment also would require advisers to maintain communications related to performance or rate of return of accounts and securities recommendations.

Highlights of the registered investment company proposals include the following:

  • Submission of a new monthly portfolio reporting form, Form N-PORT, including information such as data related to the pricing of portfolio securities, terms of derivatives contracts, and discrete portfolio level and position level risk measures.
  • Submission of a new annual reporting form, Form N-CEN, which would replace Form N-SAR and would streamline and update information reported to the SEC. This form would be filed annually 60 days after year end instead of semi-annually as currently required with the Form N-SAR.
  • New required disclosures on fund financial statements, including more information on derivatives and information on securities lending activities.

The comment period for the proposed rules will be 60 days after publication in the Federal Register. Comments can be sent electronically at http://www.sec.gov/rules/proposed.shtml. All submissions should refer to File Number S7-08-15. The SEC press release can be found here.

Questions on this topic? Contact our Financial Services Team.  information@keitercpa.com | 804.747.0000

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Posted by: Scott Hoffmann, CPA

Scott is a Manager in Keiter’s Business Assurance & Advisory Services group. He provides insights and opportunities to clients in the financial services industry. His clients include broker-dealers, alternative investment funds, hedge funds, real-estate investment funds, and other financial institutions.  Scott is a member of Keiter’s Financial Services Industry team.  Read more of Scott’s articles on our blog.