Preparing to file Form ADV

The Private Fund Investment Advisers Registration Act of 2010 (the ‘Investment Advisers Registration Act’), which was a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, substantially alters the registration requirements applicable to investment advisers, including limiting exemptions from registration as an investment adviser under the Investment Advisers Act of 1940 (the ‘Advisers Act’). As a result, the Investment Advisers Registration Act will require most US private equity, hedge fund and other private fund investment advisers (and some non-US investment advisers to private funds) to register with the Securities and Exchange Commission.

In order to become a registered investment adviser, an investment adviser must first complete and electronically file Form ADV – the investment adviser registration application – with the SEC through an Investment Advisers Registration Depository (IARD) account. Once Form ADV is filed with the SEC and an investment adviser’s registration becomes effective, the investment adviser’s Form ADV will be publicly available through the SEC’s website.

The Advisers Act makes it unlawful for any person to willfully make any untrue statement of material fact or to willfully omit to state any material fact that is required to be disclosed pursuant to Form ADV. Therefore, it is important that a Form ADV filed with the SEC be completed accurately and thoroughly by an investment adviser. Although this chapter provides an investment adviser with an overview of the registration process, including general information on completing and electronically filing Form ADV, an investment adviser may wish to consider retaining legal counsel in order to ensure that the investment adviser’s Form ADV is properly completed and filed with the SEC. Investment advisers registering with the SEC and/or with a state securities authority are required to submit Form ADV electronically through IARD, which is an electronic filing system for investment advisers operated by the Financial Industry Regulatory Authority (FINRA). An investment adviser preparing to register should obtain a copy of an IARD Entitlement Package from the IARD website (www.iard.com).

In order to register as an investment adviser through IARD, an investment adviser must first create an IARD account by completing and returning by regular mail or overnight service the IARD Entitlement Package to FINRA. The IARD Entitlement Package requires an investment adviser to designate a super account administrator (SAA) who will have access to all applicable applications and privileges in the FINRA Entitlement Program that are available to the investment adviser.

The SAA will also have the ability to create account administrators and user accounts for other individuals who may access and update certain information on the system. Upon receiving completed forms, FINRA will assign an identification number or Central Registration Depository (CRD) number to the investment adviser and a user ID code and password to the SAA. An investment adviser should generally allow FINRA two weeks to process the investment adviser’s entitlement forms. After FINRA processes an investment adviser’s forms, FINRA will send a confirmation packet to the investment adviser, which contains the above information, instructions on how to complete an electronic filing and instructions on how to pay any necessary fees collected by IARD.

Once an investment adviser receives a confirmation packet from FINRA, the investment adviser should send appropriate funds by check or wire to its IARD financial account. In determining the amount of funds that the investment adviser should deposit in its IARD financial account, an investment adviser should consider the amount of initial set-up fees applicable to the investment adviser and any fees associated with state filings. An investment adviser should generally allow FINRA 48 hours to process funds. After funds are credited to an investment adviser’s account, the investment adviser may access Form ADV through its IARD account, complete Form ADV and submit Form ADV electronically through IARD to the SEC and/or any applicable state securities authorities. An investment adviser may prepare and store draft filings to its IARD account for a period of up to 120 days prior to finalizing and submitting its Form ADV to the SEC. An investment adviser may wish to consult with legal counsel and/or FINRA’s website for additional information and instructions on how to file Form ADV electronically.

This partial chapter is one of 24 in The US Private Equity Fund Compliance Guide: How to register and maintain an active and effective compliance program under the Investment Advisers Act of 1940, a new book from PEI Media.