All registered investment adviser ("RIA") firms, whether registered at the federal or state level, need to file this year's required Form ADV amendment within 90 days of the firm’s fiscal year-end (generally March 31, 2017 with a traditional December 31, 2016 fiscal year end date). Even if an RIA firm was first registered in late 2016, the investment advisory firm is still required to file annual Form ADV updating amendment on March 31, 2017 if the firm has a traditional December fiscal year-end. Failure to file the required annual amendment can result in serious regulatory issues.
- Inform all clients of any material changes to the firm's Form ADV within 120 days of the firm's fiscal year end (April 30, 2017 for firms with a December fiscal year-end) by doing one of the following:
- Deliver to each client a summary of the firm's Form ADV material changes along with instructions on how a client can obtain the firm's full updated Form ADV Part 2 (or)
- Deliver a full copy of the firm's full updated Form ADV Part 2 to clients which includes a summary of material changes.
As RIA compliance consultants, we recommend the following best practices related to the annual delivery requirements:
- Before a firm begins sending these documents electronically to a client, the firm must first have an electronic delivery authorization on file for the client.
- If sending electronically to clients, the documents should be directly attached to the email. Simply providing a link to access these documents will generally not suffice as meeting the firm's delivery requirements.
- Whether sending these documents electronically or by mail, the firm should log this delivery for each client in the firm's compliance files.
As is typical, most investment advisory firms appear to be waiting to file the mandatory annual renewal amendment until closer to the March 31, 2017 deadline. According to the latest publicly available Securities and Exchange Commission ("SEC") RIA registration data, there are 11,277 SEC-registered RIA firms with a December fiscal year-end initially registered in 2016 or a prior year. As of February 28, 2017, 2,879 of those firms have filed a Form ADV amendment in 2017. Thus, at the federal level, close to 75% of firms have still yet to file the required amendment.
It's important to remember that RIA firms registered with the SEC will also need to pay the SEC Annual Updating Amendment Fee before being able to file the required Form ADV amendment. Traditionally, the SEC amendment fee for RIA firms with over $100 million in regulatory assets under management ("AUM") is $225. For SEC-registered firms with between $25-$100 million in AUM, the fee is $150 and for the SEC-registered firms with less than $25 million in AUM, the fee is $40. These SEC annual amendment fees are charged in addition to the annual notice-filing and individual investment adviser representative registration fees which were previously charged to RIA firms in December by the relevant states to firms registered at the federal level. These fees must be credited to the firm's Investment Adviser Registration Depository ("IARD") website Daily Account before the Form ADV amendment can be submitted on the filing system.
Lexington Compliance and RIA in a Box LLC are not law firms, investment advisory firms, or CPA firms. Lexington Compliance and RIA in a Box LLC do not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.