82 FR 21472 - Technical Amendments to Form ADV and Form ADV-W

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 88 (May 9, 2017)

The Securities and Exchange Commission (the ``Commission'' or ``SEC'') is making technical amendments to Form ADV under the Investment Advisers Act of 1940 (``Advisers Act'') to reflect the enactment of a Wyoming state law regulating investment advisers. Form ADV is the form advisers use to register with the Commission and the state securities regulatory authorities. The Commission is also making similar amendments to Form ADV-W, the form advisers use to withdraw from registration with the Commission or the states.

[Federal Register Volume 82, Number 88 (Tuesday, May 9, 2017)]
[Rules and Regulations]
[Pages 21472-21475]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-09331]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 279

[Release No. IA-4698]


Technical Amendments to Form ADV and Form ADV-W

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; technical amendments.

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SUMMARY: The Securities and Exchange Commission (the ``Commission'' or 
``SEC'') is making technical amendments to Form ADV under the 
Investment Advisers Act of 1940 (``Advisers Act'') to reflect the 
enactment of a Wyoming state law regulating investment advisers. Form 
ADV is the form advisers use to register with the Commission and the 
state securities regulatory authorities. The Commission is also making 
similar amendments to Form ADV-W, the form advisers use to withdraw 
from registration with the Commission or the states.

DATES: Effective July 1, 2017.

FOR FURTHER INFORMATION CONTACT: Bridget D. Farrell, Senior Counsel or 
Melissa Roverts Harke, Senior Special Counsel at (202) 551-6787 or 
[email protected], Investment Adviser Regulation Office, Division of 
Investment Management, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Commission is adopting technical 
amendments to Form ADV [17 CFR 279.1] and Form ADV-W [17 CFR 279.2] 
under the Advisers Act to correct and update what will be outdated 
references in those forms to the state of Wyoming due to the enactment 
by Wyoming of legislation regulating investment advisers, which will be 
effective as of July 1, 2017.\1\
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    \1\ Wyoming Uniform Securities Act, Wyo. Stat. Ann. Sec. Sec.  
17-4-101, 17-4-403 through 17-4-412 (effective July 1, 2017) 
(``Wyoming Securities Act'').
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    An investment adviser must register with the Commission unless it 
is prohibited from registering under section 203A of the Advisers Act 
or relies on an exemption from registration under section 203.\2\ Under 
section 203A(a)(1) of the Advisers Act, an adviser that is regulated or 
required to be regulated as an investment adviser in the state in which 
it maintains its principal office and place of business is prohibited 
from registering with the Commission unless the adviser has assets 
under management of not less than $25 million, or advises an investment 
company registered under the Investment Company Act of 1940.\3\ Under 
section 203A(a)(2) of the Advisers Act, an investment adviser with 
between $25 million and $100 million of assets under management (``mid-
sized adviser'') is also prohibited from registering with the 
Commission if

[[Page 21473]]

that adviser is required to be registered as an investment adviser in 
the state in which it maintains its principal office and place of 
business and, if registered, would be subject to examination as an 
investment adviser.\4\ These provisions make the states the primary 
regulators of smaller advisers and the Commission the primary regulator 
of larger advisers.\5\ However, all investment advisers--regardless of 
the amount of assets they manage--must register with the Commission if 
their principal office and place of business is located in a state that 
has not enacted a statute regulating advisers.\6\
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    \2\ 15 U.S.C. 80b-3a; 15 U.S.C. 80b-3.
    \3\ 15 U.S.C. 80b-3a(a)(1).
    \4\ 15 U.S.C. 80b-3a(a)(2). Section 203A(a)(2) also provides 
exceptions to the prohibition on Commission registration of state-
registered mid-sized advisers for advisers to registered investment 
companies or business development companies under the Investment 
Company Act of 1940 and advisers that would otherwise be required to 
register with 15 or more states.
    \5\ See Rules Implementing Amendments to the Investment Advisers 
Act of 1940, Investment Advisers Act Release No. 3221 (June 22, 
2011) [76 FR 42950 (July 19, 2011)].
    \6\ See Rules Implementing Amendments to the Investment Advisers 
Act of 1940, Investment Advisers Act Release No. 1633, section I 
(May 15, 1997) [62 FR 28112 (May 22, 1997)].
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    Recently, the state of Wyoming enacted a statute regulating 
investment advisers that will become effective July 1, 2017.\7\ 
Further, our staff has contacted the state securities authority for the 
state of Wyoming, the Wyoming Secretary of State Compliance Division, 
which has advised our staff that mid-sized advisers with a principal 
office and place of business in Wyoming will be required to be 
registered with the state and will be subject to examination. As a 
consequence, by operation of the Wyoming statute, as of July 1, 2017, 
an investment adviser with a principal office and place of business in 
Wyoming may not register with the Commission unless it has greater than 
$100 million in assets under management, advises a registered 
investment company, or is eligible to rely on one of the exemptions 
from the prohibition on registration contained in rule 203A-2.\8\
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    \7\ Wyoming Securities Act Sec. Sec.  17-4-403-412.
    \8\ Absent eligibility for Commission registration, these 
advisers are subject to the registration provisions of Wyoming law. 
In addition, advisers ineligible for Commission registration that 
have their principal office and place of business in Wyoming may be 
required to register in one or more other states, subject to the 
laws of those states.
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    As a result of this Wyoming statute, the Commission is making 
technical amendments to Form ADV as well as to Form ADV-W to reflect 
the addition of the state of Wyoming to the group of states with 
investment adviser regulation. Specifically, any adviser filing an 
initial Form ADV or an amendment to an existing Form ADV on or after 
July 1, 2017 will not be able to select Item 2.A.(3) of Form ADV, which 
currently indicates having a principal office and place of business in 
Wyoming (which does not regulate advisers) as a basis for Commission 
registration. Further, a checkbox for ``WY'' will be added to Item 2.C. 
of Form ADV to enable state notice filings for Commission-registered 
advisers. Finally, a checkbox for ``WY'' will also be added to section 
(b) of Form ADV-W, concerning withdrawals from state investment adviser 
registration.\9\ On October 1, 2017, Item 2.A.(3) will be redesignated 
as ``Reserved.'' The same change will be made to Schedule R, Section 
2.A.(3) for relying advisers.\10\
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    \9\ Item 2.A.(3) on Form ADV will be disabled as a basis for 
registration in the Investment Adviser Registration Depository 
(``IARD'') on July 1, 2017, when the Wyoming statute becomes 
effective. Additionally, on that date, IARD will be programmed to 
accept Wyoming notice filings, and to enable withdrawal from Wyoming 
registration. However, IARD will not be programmed to replace the 
text in Item 2.A.(3) with ``Reserved'' or to make the amendments to 
Schedule R discussed in this paragraph until October 1, 2017, in 
order to implement those amendments concurrently with the unrelated 
amendments to the form adopted recently. See Form ADV and Investment 
Advisers Act Rules, Investment Advisers Act Release No. 4509 (Aug. 
25, 2016) (``Release 4509'') [81 FR 60418 (Sept. 1, 2016)] 
(compliance date October 1, 2017).
    \10\ Schedule R is a schedule to Form ADV that may be used by 
private fund advisers that are registered with the Commission and 
operate a single advisory business through multiple legal entities 
to file a single registration form, subject to conditions. See 
Release 4509.
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Procedural and Other Matters

    Under the Administrative Procedure Act (``APA''), notice of 
proposed rulemaking is not required when the agency, for good cause, 
finds ``that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \11\ The Commission 
is adopting technical amendments to correct and eliminate what will 
automatically become outdated provisions in Part 1A of Form ADV and 
Form ADV-W as a result of legislation enacted by the state of Wyoming, 
which will be effective July 1, 2017. These amendments are therefore 
ministerial in nature. Accordingly, the Commission finds good cause 
that publishing the amendments for comment is unnecessary.\12\
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    \11\ 5 U.S.C. 553(b).
    \12\ The amendments also do not require analysis under the 
Regulatory Flexibility Act (``RFA''). See 5 U.S.C. 601(2) (for 
purposes of RFA analysis, the term ``rule'' generally means any rule 
for which the agency publishes a general notice of proposed 
rulemaking).
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    We do not believe that these ministerial amendments to Forms ADV 
and ADV-W, to reflect the addition of Wyoming to the group of states 
with investment adviser regulation, make any substantive modifications 
to any existing collection of information requirements or impose any 
new substantive recordkeeping or information collection requirements 
within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\13\ Accordingly, we are not revising any burden and cost 
estimates in connection with these amendments.\14\
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    \13\ 44 U.S.C. 3501 et seq. As noted in the Economic Analysis 
below, we recognize that approximately 35 investment advisers would 
likely be affected by the new Wyoming state law. Thus, while the 
enactment of the Wyoming state law may impact a small number of 
Commission-registered small and mid-sized investment advisers that 
have a principal office and place of business in Wyoming, we believe 
that the amendments adopted today do not impose substantive new 
burdens as they may marginally reduce the overall population of 
respondents and therefore will not affect the current overall burden 
estimates for affected forms.
    \14\ The most recent Paperwork Reduction Act analysis for Form 
ADV, which is pending approval by the Office of Management and 
Budget (OMB Control No. 3235-0049), is based upon the number of 
registered advisers and exempt reporting advisers as of May 1, 2016.
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Economic Analysis

    As a result of the Wyoming statute, and its interaction with the 
Advisers Act and rules thereunder, small and mid-sized investment 
advisers who have a principal office and place of business in Wyoming, 
and cannot assert another basis for continuing to remain registered 
with the Commission, will be required to register with the Wyoming 
Secretary of State, deregister with the Commission, and be subject to 
Wyoming oversight as of July 1, 2017.\15\ This transition of these 
Commission-registered investment advisers to Wyoming oversight is a 
result of a Wyoming statute and therefore does not necessitate 
additional rule changes by the Commission, but will cause Forms ADV and 
ADV-W to contain outdated provisions that reflect the prior status of 
Wyoming investment advisers who had been able to register with the 
Commission before July 1, 2017. This rulemaking updates those forms 
accordingly. In considering the economic effects of this rulemaking, we 
primarily focus on any effects that changes to the forms might have on 
Commission-registered advisers filing Form ADV and ADV-W. However, we 
recognize that we are making these changes to the forms in light of the

[[Page 21474]]

broader transition of certain Wyoming investment advisers to Wyoming 
oversight--a transition that will entail a set of economic effects 
separate from the changes to the forms--and we briefly discuss the 
effects of this broader transition.
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    \15\ Specifically, for small investment advisers, the impact of 
the transition to state oversight is the result of the interaction 
of the Wyoming statute with section 203A(a) and our 1997 rule, see 
supra note 6; for mid-sized investment advisers, it is the result of 
section 203A(a) as amended by Section 410 of the Dodd-Frank Act, and 
our 2011 rule, see supra note 5.
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    As of February 1, 2017, there are 40 investment advisers that 
selected Item 2.A.(3) of Form ADV, indicating that the adviser has a 
principal office and place of business in the state of Wyoming. Of 
these 40 investment advisers, four advisers have identified themselves 
as those with regulatory assets under management of $100 million or 
more by checking Item 2.A.(1) on Form ADV and will continue to be 
required to register with the Commission, regardless of the change in 
the statute enacted by the state of Wyoming. However, based on 
regulatory assets under management (Item 5.F.(2)(c) on Form ADV), there 
is one additional adviser with regulatory assets under management of 
$100 million or more that did not identify itself by Item 2.A.(1) that 
we therefore anticipate would remain registered with the Commission. 
Only one adviser currently selecting Item 2.A.(3) also selected Item 
2.A.(2) on Form ADV as of February 1, 2017, indicating that it is a 
``mid-sized adviser'' with regulatory assets under management of more 
than $25 million but less than $100 million; however, based on 
regulatory assets under management, we identified seven additional mid-
sized advisers that did not select Item 2.A.(2). We anticipate these 
eight advisers would need to change their registrations to state 
registration, absent an alternative basis for remaining registered with 
the Commission. The remaining 27 advisers report regulatory assets 
under management of less than $25 million and checked only Item 2.A.(3) 
as a basis for registration with the Commission and would need to 
change their registrations to state registration absent an alternative 
basis for remaining registered with the Commission.
    Thus, there are approximately 35 advisers that have not indicated 
an alternative basis for remaining registered with the Commission after 
the Wyoming statute becomes effective on July 1, 2017,\16\ and that we 
therefore assume will be required to register with the state of Wyoming 
and withdraw from registration with the Commission.\17\ These 35 
investment advisers collectively reported $530 million in regulatory 
assets under management as of February 1, 2017.
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    \16\ We arrive at 35 mid-sized and small advisers by two means. 
First, we take the 40 Wyoming advisers and subtract the five 
advisers who either have checked the large-size box (Item 2.A.(1)) 
or who have assets under management that would seem to permit them 
to check Item 2.A.(1). Alternatively, we sum together the adviser 
who checked the mid-sized box (Item 2.A.(2)) together with firms 
that have assets under management that would appear to make them 
mid-sized (seven), as well as those that have assets under 
management that would seem to make them small advisers (27), none of 
which have checked any additional box that would constitute an 
alternative basis for remaining registered.
    \17\ As these 35 small and mid-sized advisers may have an 
alternative basis for remaining registered with the Commission 
(e.g., they serve as an adviser to a registered investment company 
or business development company, or are a pension consultant), 35 is 
likely to be an upper bound; however, we assume that all 35 advisers 
will be required to shift for purposes of understanding the possible 
magnitude of the change.
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    The Commission has analyzed the effects of the changes to the forms 
as a result of the Wyoming legislation and anticipates only nominal 
benefits or costs, if any, to arise from the technical amendments to 
Form ADV and Form ADV-W to reflect the change in Wyoming law. The 
removal of Item 2.A.(3) from Form ADV will prevent investment advisers 
from improperly checking the box previously used to identify investment 
advisers from the state of Wyoming, making clear to such advisers that 
they are no longer eligible to register with the Commission on the 
basis of having a principal office and place of business in Wyoming. 
Correspondingly, amendments to Schedule R of Form ADV to remove Item 
2.A.(3) from the Schedule will have effects for relying advisers 
subject to umbrella registration similar to the effects for advisers 
that do not use Schedule R but respond to Item 2.A.(3) of Form ADV. 
Further, Item 2.C of Form ADV will now be amended to include Wyoming 
check boxes for Commission-registered advisers to send notice filings 
to Wyoming. Finally, Form ADV-W will be revised to allow Wyoming 
registrants to withdraw their registration with Wyoming as necessary.
    As Item 2.A.(3) would not be relevant to investment advisers 
without a principal office and place of business in the state of 
Wyoming, we do not believe that changes to the forms will impose any 
costs on these investment advisers to update their systems or otherwise 
review or understand the impact of the changes.\18\ While some advisers 
that remain registered with the Commission may need to check the notice 
filing box to send notice filings to Wyoming, we anticipate that the 
burden to check the box will be nominal, if any. The changes to the 
forms also do not directly impose any costs on the advisers who must 
change their registration as a result of the Wyoming statute. The 
Commission further anticipates that these technical amendments to Form 
ADV and Form ADV-W will have minimal, if any, effects on efficiency, 
competition, or capital formation because the amendments reflect only 
ministerial changes to Forms ADV and ADV-W.
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    \18\ To the extent that filers have fewer questions to research 
when completing the form, this removal of Item 2.A.(3) may reduce 
the costs associated with filing activities for investment advisers 
with a principal office and place of business in the state of 
Wyoming.
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    Separately, we recognize that approximately 35 investment advisers 
will be required to transition to Wyoming oversight as a self-executing 
result of the Wyoming statute's interaction with our existing statutes 
and rules. We acknowledge that this transition resulting from the 
Wyoming statute will have economic effects on these entities. In our 
2011 rule implementing Section 410 of the Dodd-Frank Act, which 
transitioned mid-sized investment advisers to state oversight, we 
discussed certain economic effects that result from transitioning a 
class of advisers from federal to state oversight.\19\ These economic 
effects include costs incurred by transitioning advisers to make the 
necessary filings to register with the state and to withdraw from 
Commission registration,\20\ and to comply with the state's ongoing 
reporting and inspections regime. Similarly, Wyoming advisers will be 
required to calculate and monitor assets under management going forward 
to determine if Commission registration (or deregistration, for those 
currently exceeding the threshold) would be required. At the same time, 
these advisers transitioning as a result of the Wyoming statute may 
experience cost savings associated with no longer being subject to the 
Commission's regulatory regime for registered investment advisers. 
Because the amendments affect only 35 small to mid-sized advisers that 
have principal offices and a place of business in the state of Wyoming 
out of a total 12,176 investment advisers currently filing Form ADV, 
the Commission does not anticipate that, taken together, these changes 
would have a significant effect on efficiency, competition, or capital 
formation.
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    \19\ See supra note 5.
    \20\ ``The state'' here principally refers to Wyoming. We 
recognize that advisers transitioning to Wyoming registration may be 
required to register with additional states as well, which may 
impose additional costs on such advisers.
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Statutory Authority

    The Commission is adopting technical amendments to Form ADV under 
section 19(a) of the Securities Act of 1933 [15 U.S.C. 77s(a)], 
sections 23(a)

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and 28(e)(2) of the Securities Exchange Act of 1934 [15 U.S.C. 78w(a) 
and 78bb(e)(2)], section 319(a) of the Trust Indenture Act of 1939 [15 
U.S.C. 7sss(a)], section 38(a) of the Investment Company Act of 1940 
[15 U.S.C. 80a-37(a)], and sections 203(c)(1), 204 and 211(a) of the 
Investment Advisers Act of 1940 [15 U.S.C. 80b-3(c)(1), 80b-4, and 80b-
11(a)].
    The Commission is adopting technical amendments to Form ADV-W (17 
CFR 279.2) under the authority set forth in sections 203(h), 204 and 
211(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(h), 80b-
4, and 80b-11)).

List of Subjects in 17 CFR Part 279

    Reporting and recordkeeping requirements; Securities.

Text of Rule and Form Amendments

    For the reasons set forth in the preamble, title 17, chapter II of 
the Code of Federal Regulations is amended as follows:

PART 279--FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS ACT OF 
1940

0
1. The authority citation for part 279 continues to read as follows:

    Authority: The Investment Advisers Act of 1940, 15 U.S.C. 80b-1, 
et seq.


Sec.  279.1   [Amended]

0
2. Form ADV (referenced in Sec.  279.1) is amended by:
0
a. Removing the phrase ``have your principal office and place of 
business in Wyoming (which does not regulate advisers);'' from Part 1A, 
Item 2.A.(3) and adding in its place ``Reserved'';
0
b. Adding ``[ballot] WY'' after ``[ballot] WI'' in the table of Part 
1A, Item 2.C.; and
0
c. Removing the phrase ``have your principal office and place of 
business in Wyoming (which does not regulate advisers);'' from Part 1A, 
Schedule R, Section 2.A.(3) and adding in its place ``Reserved''.

    Note: The text of Form ADV does not and the amendments will not 
appear in the Code of Federal Regulations.

Sec.  279.2   [Amended]

0
3. Form ADV-W (referenced in Sec.  279.2) is amended by adding 
``[ballot] WY'' after ``[ballot] WI'' in the table in paragraph (b) of 
the Status section.

    Note: The text of Form ADV-W does not and the amendments will 
not appear in the Code of Federal Regulations.


    By the Commission.

    Dated: May 4, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017-09331 Filed 5-8-17; 8:45 am]
 BILLING CODE 8011-01-P