SEC's Continued Focus on Risk: ADV Amendments and Supervision Initiative


Risk comes from not knowing what you’re doing.
- Warren Buffet

In recent years, the SEC has often repeated its commitment to a “risk based” approach to examination and enforcement. Recently the SEC has taken steps to better enable themselves to assess advisers’ risks by expanding the required disclosures in Form ADV. The SEC’s focus on risk is also apparent in their new “Supervision Initiative” for advisers that hire individuals with a history of disciplinary events. The changes to Form ADV will affect every SEC-registered adviser, so get ready to review and revise your information gathering and reporting processes. And while you may not have to change a thing in order successfully navigate an exam under the Supervision Initiative, you would hate to be surprised. So where do you start?

The amendments to Form ADV create a new reporting regime for RIAs that have separately managed account (SMA) business, codify umbrella registration and create or alter a myriad of other disclosure requirements, including information about social media accounts, parallel managed accounts and outsourced CCOs. Changes can be found on nearly every item of Part 1A and related sections of Schedule D as well as the General Instructions. The Glossary of Terms has been updated to incorporate the changes.

OCIE’s new “Supervision Initiative” will examine the supervision practices and compliance programs of RIAs that employ or hire individuals with a history of disciplinary events. Examiners will focus on the RIA’s compliance program, public disclosure of regulatory, disciplinary or other related actions, conflicts of interest (especially those related to financial arrangements initiated by supervised persons with a disciplinary history), and the adviser’s marketing materials (with a focus on identifying any conflicts or risks around supervised persons with a disciplinary history).

The SEC is focused on risk, and you should be too. Ask yourself a few questions about whether your compliance program is up to snuff. How do you identify and disclose employees’ disciplinary histories? Once identified, does your program address additional risks posed by these employees? Also, take some time well before the ADV amendments go into effect in October of next year to determine how your firm will identify and provide the new information required under the ADV.

As always, let us know if you have any questions or we can be of any assistance. You may contact Laura Rauman at 414-935-6361 or








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