SEC Public Disclosures Guide: SMA Requirements (1 of 5)

    

 

We  at Shearman & Sterling were pleased to have the opportunity to present our thoughts on “SEC Public Disclosures - A Guide for Investment Advisers” at the MyComplianceOffice Webinar on October 13. We had an enthusiastic crowd and some lively exchanges. We’d like to summarize the main points of our presentation here in a five-part series.

Today we summarize, "SMA Disclosure Requirements"

The Securities and Exchange Commission has adopted new disclosure requirements for Form ADV with regard to the SMA (Separately Managed Accounts) business conducted by Registered Investment Advisers.  The SEC took advantage of this rule-making opportunity to clarify umbrella registration procedures, to expand identification information required of investment advisory businesses and to tighten up retention rules for performance records.  All of these provisions will take effect October 1, 2017.

The SEC rules require public disclosure of significant aspects of the SMA advisory activities of RIAs. The principal disclosure requirements will be:

1) Disclosure by all RIAs of the allocation of the aggregate Regulatory Assets Under Management of SMA clients in twelve categories of investment assets.

2) Disclosure by RIAs with SMA RAUM aggregating between $500 million and $10 billion of the allocation of aggregate borrowings by SMAs in three levels of gross notional exposure: (i) less than 10%, (ii) 10% to 149% and (iii) 150% or more. Disclosure will be made annually at an annual data point.

3) Disclosure by RIAs with SMA RAUM aggregating in excess of $10 billion of the same borrowing data, annually, at semi-annual and annual data points, and additional disclosure by such RIAs of the allocation of aggregate usage by SMAs of six categories of derivatives in the same three levels of gross notional exposure. Again, disclosure will be made annually at semi-annual and annual data points.

4) In addition, RIAs will be required to report the exact number of their SMA clients within three ranges of their aggregate SMA RAUM.  RIAs with less than five SMA clients will be permitted to disclose a range of 1 to 5 clients in lieu of an exact number.

This is the first post in our five-part series entitled, “SEC Public Disclosures - A Guide for Investment Advisers". Click here to view part 2, "Umbrella Registration" . Alternatively you can download the full report here

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