With the recent decline in the markets due to COVID-19, it is likely that many investment adviser firms relying upon asset-based fees are also facing a significant decline in the investment advisory fee revenue which can have compliance implications depending upon the circumstances.
Does an Investment Adviser Representative Have to Disclose PPP Loan Forgiveness as a Compromise on Form U4?
April 17, 2020
As investment adviser firms start to receive loan proceeds through the Paycheck Protection Program (“PPP”), which is a loan program that originated from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, many investment adviser firms have asked whether the forgivable nature of the PPP loan will constitute a compromise with a creditor for purposes of Item 14K of the Form U4 of an investment adviser representative who is a control person.
In April 2020, the New York Attorney General’s Investor Protection Bureau (IPB) proposed rule changes to 13 NYCRR Part 11. These rule changes would require the registration of investment adviser representatives through the IARD system. New York investment adviser representatives would be required to meet registration and exam requirements. Under the proposed rules, those who must be registered include individuals working for state or SEC-registered investment adviser firms. Currently, New York is the only state that does not license investment adviser representatives. The application for initial registration as an investment adviser representative would be made by completing the Form U4 and filing the form with the CRD/IARD. Click the following link to read the proposed rules in their entirety https://ag.ny.gov/sites/default/files/full-text-13nycrr11.pdf.
SEC Is Not Extending the Deadlines for RIAs to File/Deliver Form ADV Part 3 Due to COVID-19
April 03, 2020
In response to numerous inquiries and requests for an extension of the deadlines facing SEC registered investment advisers related to filing and/or delivering the Form ADV Part 3/Client Relationship Summary (“CRS”), the U.S. Securities and Exchange Commission (“SEC”) issued a Public Statement on April 2, 2020 indicating that the SEC is not extending the filing and delivery deadline for the Form ADV Part 3/CRS.
SEC’s Response to COVID-19 – Changes Conditions for Utilizing the 45-Day Extension for Filing/Delivering Form ADV
March 27, 2020
Due to the further disruptions facing investment adviser firms related to COVID-19, the U.S. Securities and Exchange Commission (SEC) modified its original order of March 13, 2020 (“Original Order”), which provided an investment adviser firm registered with the SEC or an exempt reporting adviser (“ERA”) a 45-day extension to file the Form ADV Annual Amendment or Form PF and deliver the Form ADV Part 2A (or summary of material changes) to existing investment advisory clients if certain conditions were met by the investment adviser firm. (Please see our previous blog entry for more details about the SEC’s initial Response to COVID-19 and the conditions for an investment adviser to obtain relief.)
Due to disruptions caused by COVID-19 pandemic, the Colorado Securities Commission issued a Temporary Order relief for investment adviser firms registered with the Colorado Division of Securities. According to the relief order, an investment adviser firm registered with the Colorado Securities Commissioner, “may perform any of the Form ADV filing, updating and customer delivery requirement set forth by the Colorado Securities Act and related regulations up to 45 days after such action is due to be performed.” In effect, with this order relief Colorado extends its ADV filing deadline.
In an effort to try to assist investment adviser firms dealing with COVID-19, RIA Compliance Consultants is hosting a free webinar, “Compliance Tips for COVID-19 and Volatile Market,” on Thursday, March 26 at 12:00 PM CT. During this free webinar RIA Compliance Consultants’ President, Bryan Hill, will discuss Compliance Issues with COVID-19 and volatile markets including privacy policies, succession planning, suitability, and business continuity planning. To register for this webinar please click the following link https://zoom.us/webinar/register/WN_RCsmPcGKRJ6N1gl67LsTuA
In this new environment of working from home during the COVID-19 pandemic, it’s important for investment adviser firms to remember to conduct initial and ongoing due diligence of the cybersecurity policies and practices (including incident response plans) of third-party vendors which maintain confidential information of your investment advisory clients and provide services through the cloud over the Internet.
As your state registered investment adviser firm completes its Form ADV Annual Amendment, it’s important not to forget that many state securities regulators also require a state registered investment adviser firm to submit annual financial statements and/or other documents directly to the state securities regulator (outside of the IARD/CRD system).
Business Continuity Update During COVID-19 Pandemic
March 19, 2020
Due to COVID-19 pandemic, RIA Compliance Consultants activated last week its business continuity plan.
