SEC Increases Amount of Data Advisors Must Include on Form ADV

Amendments to Investment Advisers Act Rule 204-2 will require advisors to maintain additional records related to the calculation and distribution of performance information.

The agency noted that its examinations staff can use this information to help evaluate advisor performance claims, and "could reduce the incidence of misleading or fraudulent advertising and communications by advisors."

As to branch offices, the SEC currently requires an advisor to provide contact and other information about its principal office and place of business, and, if an advisor conducts advisory activities from more than one location, about its largest five offices in terms of number of employees.

Under the final rule, however, the Commission states that in order to help exam staffers learn more about an advisor's business and identify locations to conduct exams, the new rule will require advisors to provide information on the "total number of offices at which they conduct investment advisory business" as well as about their 25 largest offices in terms of number of employees.

As to social media, the SEC states that "because the social media environment is rapidly evolving, we think it will be useful to the Commission and investors to have current information on an advisor's use of social media on Form ADV."

As it stands now, advisors have to list their website addresses on Form ADV. The revised Form ADV, IAA explains, "will require them to also list their other social media platforms, if any, such as Twitter, Facebook, or LinkedIn and provide the address." Advisors will only list their publicly available sites if they control the content, IAA says. "The SEC is not requiring information about the social media accounts of employees."

— Check out SEC Takes Aim at Performance That's Just Too Good to Be True on ThinkAdvisor.