Electronic Filing by Investment Advisers and Amendments to Form ADVFall 2000
In September, the Securities and Exchange Commission ("SEC") issued a release announcing that the transition to electronic filing for investment advisers would begin in January 2001. The Investment Adviser Registration Depository ("IARD"), which NASD Regulation, Inc. ("NASDR") will operate, will permit investment advisers to satisfy their filing obligations under state and federal law with a single electronic filing made over the Internet. The SEC also announced that it was amending Form ADV to update the form and prepare it for electronic filing.
Establish IARD User Account. This fall, the SEC will mail to each SEC-registered adviser the forms and instructions needed to set up an IARD user account with NASDR. Advisers must complete these forms, sign them and mail them back to NASDR. NASDR will then create the adviser's IARD account for fee payments, assign the adviser a CRD number and issue passwords for the adviser's authorized personnel. NASDR will also provide advisers with instructions on how to fund their IARD billing accounts. Advisers will be required to pay to NASDR a one-time initial set-up fee and an annual updating fee which vary depending on the dollar amount of assets the adviser has under management. The initial set-up fee will range from $150 for advisers with less than $25 million of assets under management to $1,100 for advisers with more than $100 million of assets under management. The annual updating fee will range from $100 for advisers with less than $25 million of assets under management to $550 for advisers with more than $100 million of assets under management. The full fee schedule is available on the SEC's web site at www.sec.gov/iard.
Transition Schedule. Advisers registered with the SEC on January 1, 2001 must transition to electronic filing by submitting amendments to their Form ADVs through the IARD during the first four months of 2001 in accordance with a transition schedule.
If an adviser's fiscal year ends in December, the adviser must transition to electronic filing by submitting an amendment to its Form ADV through the IARD no later than:
- January 31, 2001, if the adviser's SEC file number is 801-1 through 801-36806,
- February 28, 2001, if the adviser's SEC file number is 801-36807 through 801-54145, or
- March 30, 2001, if the adviser's SEC file number is 801-54146 or higher.
Advisers having fiscal years ending in months other than December must file no later than the last day of April 2001.
SEC-registered advisers will also be able to make notice filings to, and submit filing and other fees to, the states through the IARD after January 1, 2001. The IARD will automatically calculate the amount of the fees due and will remit funds from the adviser's IARD account to the appropriate states.
Advisers will also be able to use the IARD for investment adviser representative license filings and renewals and to pay fees associated with those filings. However, this portion of the system will not be operational until later in 2001. Amendments to Part I of Form ADV.
The SEC has approved amendments to Part I of the Form ADV to accommodate electronic filing and to reflect changes in the advisory industry and the laws regulating investment advisers. Part I has been reorganized using simpler language and revisions have been made to the Schedules of Part I on which advisers must provide information about control persons and disciplinary events. In addition, Part I has been divided into two parts, segregating those items to which all advisers must respond from those additional items to which only state-registered advisers must respond. Deferment of Amendments to Part II of Form ADV.
The SEC also announced that it is deferring for later consideration adoption of amendments to Part II of Form ADV. Until such amendments are adopted, advisers must continue to provide prospective clients with Part II of Form ADV or a brochure containing at least the same information. Advisers are not required to submit these documents to the SEC until it has acted on the Part II amendments and the IARD is ready to accept Part II electronically. The SEC will notify advisers when the IARD is ready and will provide a grace period before advisers are required to file (new) Part II brochures.
The SEC pointed out that although the updating rules technically no longer apply to Part II, an adviser continues to have an obligation to update the disclosure it provides to clients to avoid misleading them. Advisers must maintain any updated copy of their Part II and provide it to the SEC staff upon request. Form 13F
. Advisers who are institutional money managers will continue to file Form 13F through the SEC's EDGAR system. State-Registered Advisers
In January 2001, the IARD will also be ready to accept filings of state-registered advisers. State-registered advisers will pay IARD fees based on the same schedule as SEC-registered advisers. All states will accept filing of Form ADV through the IARD and some states may require state-registered advisers to use the IARD.
This newsletter is published to provide our friends and clients with current information that may affect their businesses. This information is not intended to serve as specific legal advice or as a solicitation for business. If you have any questions regarding the SEC's new rules and rule amendments, please do not hesitate to contact any of the members of Godfrey & Kahn's Investment Management Practice Group.