Resolving Frequently Asked Questions

Transcription

1 Frm ADV Part 1A Updates Reslving Frequently Asked Questins Presented by: Stephen Gallett, Esq. Cary Kvitka, Esq. Max Schatzw, Esq Prvide Backgrund n: Agenda New and Revised Questins in Item 1/Sectin 1 Identifying Infrmatin Office Infrmatin Scial Media Reprting New and Revised Questins in Item 5/Sectin 5 Infrmatin abut Yur Advisry Business Separately Managed Accunt Reprting Calculating Regulatry Assets Under Management Asset Breakdwn, Use f Brrwings and Derivatives, and Key Custdians Wrap Fee Prgram Reprting Custdy Reprting and Standing Letters f Authrizatin 1

2 Item 1 and Sectin 1 f Schedule D Identifying Infrmatin Identifying Infrmatin New Sectin 1.F f Schedule D requires advisers t list their largest twenty-five ffices. By emplyee ttals As f year-end Disclse activities cnducted at these ffices FINRA branch CRD number Item 1.F(5) nw requires advisers t disclse their ttal number f ffices at which they cnduct investment advisry business. As f year-end Excluding their primary ffice 2

3 Websites and Scial Media Accunt Disclsures Amended Item 1.I. D yu have ne r mre websites r accunts n publicly available scial media platfrms (including, but nt limited t, Twitter, Facebk and LinkedIn)? Advisers nw required t disclse the address fr each scial media accunt SEC Guidance FAQs - Cncept f Cntrl Third Party Scial Media Site Parent Cmpany Emplyee Scial Media Accunts Amendment t Item 5.C. T apprximately hw many clients fr whm yu d nt have regulatry assets under management did yu prvide investment advisry services during yur mst recently cmpleted fiscal year? Financial Planning Only Clients Discrete Investment Advice N RAUM Retirement Plan Cnsulting Clients 3

4 Amendment t Item 5.D. Indicate the apprximate number f yur clients and amunt f yur ttal regulatry assets under management (reprted in Item 5.F. belw) attributable t each f the fllwing type f client. 14 Categries f Clients Fewer Than Five Client Privacy Prtectin Definitin f RAUM Frm ADV Instructin #5 fr Part 1A Cntinuus and Regular Supervisin r Management Services Amunt f RAUM attributable t each categry Additinal Infrmatin Regarding Wrap-Fee Prgrams Mre detailed infrmatin requests in Item 5.I Amunt f Assets Attributable t Spnsring a Wrap Fee Prgram Amunt f Assets Attributable t Serving as Prtfli Manager f a Wrap Fee Prgram Amunt f Assets Attributable t Serving as Spnsr and Prtfli Manager f a Wrap Fee Prgram 4

5 Item 5.G.(3) Prtfli management fr investment cmpanies (as well as business develpment cmpanies that have made an electin pursuant t sectin 54 f the Investment Cmpany Act f 1940) An adviser prviding these types f services is nw required t cmplete a new questin in Sectin 5.G.(3) f Schedule D Prvide the RAUM f all parallel managed accunts related t a registered investment cmpany (r series theref) r business develpment cmpany that yu advise. Item 5/Sectin 5 Infrmatin abut Separately Managed Accunts 5

6 New Defined Term - Separately Managed Accunts ( SMAs ) - any type f client accunt that is nt itself an Investment Cmpany, Business Develpment Cmpany, r Pled Investment Vehicles Old Defined Term Regulatry Assets Under Management Entirely New Questins in Item 5.K.(1) (4) (1) D yu have RAUM attributable t SMAs? If yes, cmplete Sectin 5.K.(1) (2) D yu engage in brrwing transactins n behalf f SMAs yu advise? If yes, cmplete Sectin 5.K.(2) Interpretive Guidance FAQs n Frm ADV (3) D yu engage in derivative transactins n behalf f SMAs yu advise? If yes, cmplete Sectin 5.K.(2) Interpretive Guidance Adpting Release (4) Des any custdian hld ten percent r mre f yur RAUM attributable t SMAs? If yes, cmplete Sectin 5.K.(3) Sectin 5.K.(1) Mid-Year and End f Year Reprting > $10 Billin in RAUM Requires Mid-Year Reprting < $10 Billin in RAUM nly End f Year Reprting 12 Categries f Asset Types Sme assets culd be classified int mre than ne categry r require discretin abut which categry applies. Yu may use yur wn internal methdlgies and the cnventins f yur service prviders in determining hw t categrize assets, s lng as the methdlgies r cnventins are cnsistently applied and cnsistent with infrmatin yu reprt internally and t current and prspective clients. Hwever, yu shuld nt duble cunt assets, and yur respnses must be cnsistent with any instructins r ther guidance relating t this Sectin. 6

7 Sectin 5.K.(2) Reprting Threshld > $500 millin f SMA assets Must Cmplete Sectin (b) Infrmatin Requested n Grss Ntinal Expsure, RAUM and Brrwings fr SMA Accunts $10 millin accunt reprting requirement Reprting Threshld fr Advisers with > $10 billin f SMA assets Mre granular reprting f Derivative Expsure Grss Ntinal Expsure f an accunt = dllar amunt f brrwings + the grss ntinal value f derivatives / RAUM f the accunt Grss Ntinal Value: The grss nminal r ntinal value f all transactins that have been entered int but nt yet settled as f the reprting date. Fr cntracts with variable nminal r ntinal principal amunts, the basis fr reprting is the nminal r ntinal principal amunts as f the reprting date. Fr ptins, use delta adjusted ntinal value. Brrwings: Brrwings include secured brrwings and unsecured brrwings, cllectively Custdy Reprting and Standing Letters f Authrizatin 7

8 Definitin f Custdy Custdy means hlding, directly r indirectly, client funds r securities, r having any authrity t btain pssessin f them. Yu have custdy if a related persn hlds, directly r indirectly, client funds r securities, r has any authrity t btain pssessin f them, in cnnectin with advisry services yu prvide t clients. Custdy includes: (ii) Any arrangement (including a general pwer f attrney) under which yu are authrized r permitted t withdraw client funds r securities maintained with a custdian upn yur instructin t the custdian; and Staff Respnses t Questins Abut the Custdy Rule Questin II.4 Q: Des an adviser have custdy if it has authrity t transfer client funds r securities between tw r mre f a client's accunts maintained with the same qualified custdian r different qualified custdians? A: Under rule 206(4)-2(d)(2)(ii), an adviser has custdy if it has the authrity t withdraw client assets maintained with a qualified custdian upn the adviser's instructin t the custdian. We d nt interpret the authrity t withdraw assets t include the limited authrity t transfer a client's assets between the client's accunts maintained at ne r mre qualified custdians if the client has authrized the adviser in writing t make such transfers and a cpy f that authrizatin is prvided t the qualified custdians, specifying the client accunts maintained with qualified custdians. In the staff s view, specifying wuld mean that the written authrizatin signed by the client and prvided t the sending custdian states with particularity the name and accunt numbers n sending and receiving accunts (including the ABA ruting number(s) r name(s) f the receiving custdian) such that the sending custdian has a recrd that the client has identified the accunts fr which the transfer is being effected as belnging t the client. That authrizatin des nt need t be prvided t the receiving custdian. Mrever, in the staff s view, an adviser s authrity t transfer client assets between the client s accunts at the same qualified custdian r between affiliated qualified custdians that bth have access t the sending and receiving accunt numbers and client accunt name (e.g., t make first-party jurnal entries) des nt cnstitute custdy and des nt require further specificatin f client accunts in the authrizatin. (Mdified February 21, 2017.) 8

9 N Actin Letter Request n behalf f the Investment Adviser Assciatin (Feb. 21, 2017) Standing Letter f Authrizatin r asset transfer authrizatin arrangements established by a client with a qualified custdian Custdy, but n requirement t btain a surprise independent verificatin if 7 Cnditins (n Fllwing Slide) Frm ADV Reprting at Item 9 The client prvides an instructin t the qualified custdian, in writing, that includes the client s signature, the third party s name, and either the third party s address r the third party s accunt number at a custdian t which the transfer shuld be directed. The client authrizes the investment adviser, in writing, either n the qualified custdian s frm r separately, t direct transfers t the third party either n a specified schedule r frm time t time. The client s qualified custdian perfrms apprpriate verificatin f the instructin, such as a signature review r ther methd t verify the client s authrizatin, and prvides a transfer f funds ntice t the client prmptly after each transfer. The client has the ability t terminate r change the instructin t the client s qualified custdian. The investment adviser has n authrity r ability t designate r change the identity f the third party, the address, r any ther infrmatin abut the third party cntained in the client s instructin. The investment adviser maintains recrds shwing that the third party is nt a related party f the investment adviser r lcated at the same address as the investment adviser. The client s qualified custdian sends the client, in writing, an initial ntice cnfirming the instructin and an annual ntice recnfirming the instructin. 9

10 Thank Yu Questins? 10