SEC Filings and State Filings

Investment advisory firms are regulated by the Securities and Exchange Commission (SEC) or state regulatory bodies, depending on the amount of assets under management. Filings with these regulatory bodies are a direct extension of advisors’ fiduciary duty to be transparent with the public and with regulators.

In other industries and contexts, a filing that is 99% correct or only one day late would be considered successful. To the SEC and state regulators, filings that are “mostly accurate” or “almost timely” are deficient. The consequences for those deficiencies can be costly, including a deficiency letter that could escalate to an administrative proceeding or enforcement action, hundreds of thousands of dollars in fines, or more. Firms with a history of deficiencies may be subject to more frequent SEC examinations. In the case of especially egregious deficiencies, advisors may be censured, barred from the industry, or even face incarceration.

Compliance Advisor Professionals, LLC (CAP) is dedicated to providing our clients with thorough, proactive filing support so that they can be confident that their filings are accurate and timely, every time. We offer consulting on a retainer model that offers our clients personal attention, predictable costs, and regular calls that ensure nothing slips through the cracks.

Filings CAP Manages for Investment Advisors

The filings we handle for our clients fall into five general categories:

Form ADV (Parts 1, 2A, 2B, and 3)

Financial advisors register their firms with the SEC or state regulators using Form ADV, and this form and its various subparts must be updated annually. Form ADV helps investors make informed decisions when selecting an investment advisor.

Part 1 details the firm’s ownership, employees, clients, and business practices. Part 2A is the Firm Brochure that describes the firm’s fees, services, investment strategies, disciplinary history, and conflicts of interest; Part 2B, the Brochure Supplement, contains information about the firm’s advisors, including their professional experience. Part 3, the Customer Relationship Summary (CRS), is a plain-English summary to help retail investors compare different firms.

Form U4 and Form U5

While Form ADV contains information about the firm, Form U4 contains detailed information about individual representatives for investor protection. Form U4 must be updated for changes that include outside business activities (OBAs), name changes, moving residences, financial disclosure events such as bankruptcies, and legal and disciplinary actions. Form U5 is filed to indicate that a particular representative no longer works for the firm.

Annual Amendments and “Other Than Annual” Amendments

As the name indicates, annual amendments are mandatory filings due each year. We work closely with our clients, providing them a detailed questionnaire to ensure that we update their data correctly. Other Than Annual Amendments are those triggered by some significant change in the business that cannot wait until the end of the year to be filed.

State Registrations and State Notice Filings

Firms with less than $100 million AUM are regulated by their state regulatory body and must register with the state. However, even SEC-regulated firms may be required to file certain state notices, such as if the firm hires a representative in a different state or works with a certain number of clients in a new state.

Annual State Renewals

Annual State Renewals are mandatory administrative filings required for investment advisory firms to maintain their legal authority to do business in a given state for the upcoming calendar year. While Annual Amendments update the firm’s data and ADV disclosures and are typically completed in Q1, Annual State Renewals address licensing and fees and are typically filed in December.

Annual State Renewals are required even for SEC-regulated firms, but state-regulated firms who miss the renewal deadline automatically have their registration with the state terminated on December 31.

CAP’s Approach to Management of SEC Filings and State Filings

Investment advisors and firms who work with CAP work with a consistent team that knows them and understands their business. We are aware of, and proactive about, required annual filings, and we make the process of completing these filings seamless for our clients.

For filings that are triggered by events other than an annual deadline, our regularly scheduled meetings with clients alert us to the need for updated filings so we can complete those updates and file them in a timely manner.

Still other filing updates are made necessary by changes to SEC rules, which can occur frequently. CAP monitors regulatory developments and updates filings accordingly, so our clients don’t have to worry about receiving a deficiency simply because they weren’t aware of a new rule.

For all filings, our goal is to do the “heavy lifting” so that our clients’ only job is to provide information and approve filings for submission.