Continuing with my look at the changes to Form ADV, I spent some time looking at the new umbrella registration.
One investment adviser (“Filing Adviser”) will be able to file a single Form ADV on behalf of itself and other investment advisers (“Relying Advisers”). This tackles the problem fund managers had when the manager was a collection of separate fund advisers.
For a variety of tax, legal and regulatory reasons, private fund managers are often carved into separate legal entities even though they operate together. There may just be a collection of fund general partners, even it looks like a single adviser to the outside.
Form ADV is based on the legal entity and therefore skews the information since the separate legal entities would have to file separate Form ADVs (or is it Forms ADV?). The SEC had provided some guidance for umbrella registrations in 2012, but there were complications around ownership on Schedules A and B.
For a group of private fund advisers that operate as a single advisory business to qualify for Umbrella Registration, they must meet these five requirements:
- The Filing Adviser and each Relying Adviser advise only private funds and/or “qualified clients” in separately managed accounts that are otherwise eligible to invest in the private funds advised by the Filing Adviser or a Relying Adviser and whose accounts pursue investment objectives and strategies that are substantially similar or otherwise related to those private funds.
- The Filing Adviser’s principal office and place of business is in the United States, and all of the substantive provisions of the Advisers Act and rules apply to the Filing Adviser and each Relying Adviser.
- Each Relying Adviser, its employees, and persons acting on its behalf are subject to the Filing Adviser’s supervision and control.
- Each Relying Adviser’s advisory activities are subject to the Advisers Act and rules, and subject to SEC examination.
- The Filing Adviser and each Relying Adviser operate under a single code of ethics and written policies and procedures adopted and implemented in accordance with rule 206(4)-7 of the Advisers Act and administered by a single chief compliance officer in accordance with the rule.
There is a new Schedule R for information on the Relying Advisers.
Sources:
- Form ADV and Investment Adviser Act Rules Release IA-4509 (.pdf)
- Separately Managed Accounts
- The SEC Wants To Know About Your Social Media
- The SEC Wants To Know If You Have An Outsourced CCO
Umbrellas at Caudan Waterfront Mall by Martin Falbisoner CC BY SA
