Compliance

SEC’s New Form ADV Expands Scrutiny on Registered Advisers

Additional information RIAs must now disclose on the Form ADV may help the SEC develop an automated system to single out firms for examination. 

By Javier Simon editors@strategic-i.com | October 10, 2017
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Registered investment advisers (RIAs) will need to share a lot more than they’re used to with the Securities Exchange Commission (SEC) now that updates to the Form ADV are in affect.

The changes require RIA firms to disclose additional information about their social media activity, separately managed accounts (SMAs), the overall client base, and assets under management, among other topics.  

G.J. King, president of consulting firm RIA in a Box, tells PLANADVISER that over time, this additional data may allow the SEC to more easily “scan the RIA space to pinpoint which firms may pose significant market risks or compliance issues, among other problems.” When it comes to social media usage, King says the SEC can also use its expanded information set to make sure RIAs are complying with marketing standards. 

“As it relates to RIAs, social media is like any other form of advertising in the SEC’s eyes,” King explains. “We can assume that over time, the SEC will have better capabilities to programmatically scan social media postings for particular keywords or problematic posts. They’re going to be scanning for phrases like ‘guarantee’ or ‘beat the market,’ anything making a promise or testimonial which may be prohibited as it relates to RIA advertising.”

Some of those can be false-positives, of course. But recent changes have made it easier for the SEC to find this data. According to RIA in a Box, firms must be very cautious about what type of social media information they choose to display on their websites. As a rule of thumb, any websites should only link to or mention such accounts belonging to the firm and in which the RIA controls the content.

According to an SEC release speaking about the new Form ADV and other topics, “staff may use this information to help prepare for examinations of investment advisers and compare information that advisers disseminate across different social media platforms, as well as to identify and monitor new platforms.” King adds that, “Being active on social media is not a prohibited activity by any means. We’re seeing more RIAs utilizing social media as part of their marketing campaigns every day. Just like with any form of advertising, you need to make sure you’re archiving your social media posts.”

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