Magazine article American Banker

SEC: Ease Adviser Disclosures

Magazine article American Banker

SEC: Ease Adviser Disclosures

Article excerpt

Byline: Donna Mitchell

Sometimes regulatory changes that are meant to benefit investors end up taxing industry professionals, though this does not appear to be the case for the Securities and Exchange Commission's new format for investment company brochures.

Last Wednesday, the SEC decided to do away with fill-in-the-blank questions organized in a check-the-box setup. Form ADV, Part 2, describes a company's investment strategies, business practices and adviser qualifications. All investment advisory firms that manage $25 million or more in assets must file the form with the SEC. (Under the financial reform law, the threshold is to rise to $100 million, in most cases.)

The new filing requirement also asks advisers to present the information in a narrative way intended to make the information easier for the public to understand. There also is to be a table of contents so that customers can find the information they want more readily, said Karen Barr, general counsel for the Investment Advisers Association in Washington.

Brochure supplements must be delivered to new and prospective clients to give resume-like information for the firm's employees who will serve clients.

"In its current form ... the format frequently does not correspond well to an adviser's business," SEC Chairman Mary L. Schapiro said in introductory remarks at the SEC's open meeting on Wednesday. "In some cases, the required disclosure may not describe the adviser's business or conflicts in a way that is truly accessible to the investor. …

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