For personal securities transaction purposes, an access person of an SEC registered investment adviser is presumed to be a beneficial owner of the securities that are held by his/her immediate family members sharing the access person’s household.
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Are there any specific personal securities reporting requirements of a SEC registered investment adviser related to the SEC Rule 204A-1?
November 02, 2018
A SEC registered investment adviser must require all access persons to submit to the chief compliance officer or other designated person, a report of all current securities holdings and transaction reports for reportable securities in which the access person has, or acquires, any direct or indirect beneficial ownership. Holdings reports must be submitted no later than 10 days after the person becomes an access person and at least annually thereafter. All information reported must be current as of a date no more than 45 days prior to the date reporting is required.
A SEC registered investment adviser’s “access persons” are any of the investment adviser’s supervised persons who have access to non-public information regarding any investment advisory client’s purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund or any person who is involved in making securities recommendations to investment advisory clients, or who has access to such recommendations that are nonpublic. If providing investment advice is an investment adviser’s primary business, all of its directors, officers and partners are presumed to be access persons.
A SEC registered investment adviser’s supervised persons includes any employees, partners, officers, directors (or other persons occupying a similar status or performing similar functions) as well as any other persons that provide advice on the investment adviser’s behalf and are subject to the investment adviser’s supervision and control.
SEC Rule 204A-1 requires a SEC registered investment adviser’s code of ethics to set forth the standards of business conduct expected of the investment adviser’s “supervised persons” and it must address personal securities trading (“PST”) by such individuals. A SEC registered investment adviser is not required to adopt a particular standard of business ethics. Rather, the standard that an investment adviser selects should reflect the investment adviser’s fiduciary obligations to its investment advisory clients and the fiduciary obligations of the individuals it supervises and require compliance with the federal securities laws. A code of ethics should set out ideals for ethical conduct premised on fundamental principals of openness, integrity, honesty and trust. A good code of ethics should effectively convey to investment adviser representatives and employees the value that the investment adviser places on ethical conduct, and the code of ethics should challenge the investment adviser representatives and employees to meet not only the letter of the law, but also the ideals of the investment adviser. An investment adviser may set higher ethical standards than the requirements set under federal securities laws.
This will vary among state securities regulators depending on the state securities regulator’s investment advisor rules and regulations. It is important for a state registered investment adviser to remember that the regulations of many state securities regulators follow the SEC’s rules for SEC registered investment advisers. Therefore, many state registered investment advisers may also be required to adopt a code of ethics similar to the SEC requirements. A state registered investment adviser will need to consult the investment adviser rules and regulations of its state securities regulator(s) to determine if this is required.
SEC Rule 204A-1 issued under the Investment Advisers Act of 1940 requires all SEC registered investment advisers to adopt a code of ethics.
