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SEC Proposes New Reporting, Disclosure Regulations

The Securities and Exchange Commission announced May 20 a set of proposed rules implementing new reporting and disclosure standards for financial advisors and investment companies. Among other things, the rules would require advisors to include more details about their business, and would permit investment companies to publish shareholder reports electronically.

The proposal would amend Form ADV, also known as the SEC’s investment adviser registration and reporting form. The rule change would mandate that advisors include additional information about their business, including their branch office operations and their use of social media.

The proposal would also:

  • require aggregate information related to assets held and use of borrowings and derivatives in separately managed accounts; and

  • permit by rule certain “umbrella registration” filing arrangements that are currently outlined in staff guidance.

  • The rule adjustments also cover Investment Advisers Act Rule 204-2, and would mandate that advisors maintain records of calculation of performance information that is distributed to anyone, lowering the distribution size threshold. Currently, advisors are only required to keep records of similar information that is distributed to 10 or more people.

    Additional regulations contained in the release would increase reporting requirements for ETFs, mutual funds, and other registered investment companies, according to the SEC. The rules would introduce Form N-PORT, which registered funds would be required to submit each month. Form N-PORT would ask for an investment company’s portfolio-wide and position-levels holding data, including:

  • data related to the pricing of portfolio securities;

  • information regarding repurchase agreements, securities lending activities, and counterparty exposures;

  • terms of derivatives contracts; and

  • discrete portfolio level and position level risk measures to better understand fund exposure to changes in market conditions.
  • In a nod to the rise of paperless records, investment companies that are currently required to offer electronic statements on an “opt-in” basis can now make them the default reporting option.

    To read more about the proposed regulations, click here. After the regulations are published in the Federal Register, there will be a 60-day comment period.