SEC might require more disclosure about SMAs and social media

Proposed rules would require advisers on their Form ADVs to divulge more about their use of separately managed accounts and social media activities

May 20, 2015 @ 12:46 pm

By Mark Schoeff Jr.

The Securities and Exchange Commission on Wednesday unanimously proposed a rule that would require investment advisers to disclose more information about their use of separately managed accounts and their social media activities.

The rule changes would require an adviser's agency registration form, or Form ADV, to include more information about assets held in SMAs and their use of leverage and derivatives. They also would require more information about branch office operations and, for the first time, make advisers list social media accounts on their ADV.

The reporting requirements on SMAs would be greater for advisers with more than $10 billion in the accounts than for those who have between $150 million and $10 billion.

As part of the reporting proposal, the commission also would require advisers to maintain performance records on accounts and securities recommendations that are distributed to any person. Currently, advisers only have to keep those records when the performance information is distributed to 10 or more people.

SEC Chairwoman Mary Jo White said SMAs are becoming increasingly popular among the 11,500 investment advisers registered with the agency.

“Approximately 73% of registered investment advisers manage a wide variety of client assets in separately managed accounts, and the commission needs a wider and deeper lens to assess possible risks,” Ms. White said.

Robert Grohowski, general counsel at the Investment Adviser Association, said he was reassured that the commission indicated it would try to make the additional reporting requirements as easy as possible for adviser compliance.

“As long as regulators are getting the information that they need and the public is getting the information it needs, and they're getting it in the most efficient way possible, then I think the industry is largely supportive of that kind of effort to modernize the reporting forms,” said Mr. Grohowski, who attended the SEC open meeting.

The public will have 60 days to comment on the proposals after they are published in the Federal Register.

In another proposal released Wednesday, the commission would require additional data from investment funds about their use of derivatives, securities lending activities, pricing of portfolio instruments and use of exchange-traded funds. They would have to disclose basic risk metrics and improve how they send data to shareholders.

The changes are designed to upgrade the SEC's reporting requirements to reflect increasingly sophisticated securities markets. They are part of an initiative Ms. White outlined in December to help the SEC better monitor potential systemic market risks posed by fund portfolios and operations.

“They will make the asset management industry stronger and more resilient, improving the ability of funds to manage their risks and — critically — the commission's ability to supervise funds and investment advisers,” Ms. White said in her opening statement at Wednesday's meeting.

SEC member Luis Aguilar said both the markets and regulators would benefit from the proposals.

“Ultimately, greater access to high quality, useful information fosters confidence in investment decisions and in regulatory actions and initiatives,” he said.

The proposals also help strengthen the SEC's position as the primary regulator of the asset management industry, said SEC member Daniel Gallagher Jr. The Financial Stability Oversight Council also is delving into the systemic risks posed by the sector, a move that is causing tension between banking and securities regulators.

“The SEC is more than up to the task,” Mr. Gallagher said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 02

Conference

Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Is Fidelity competing with retirement plan advisers?

As the Boston-based mutual fund giant expands the products and services it brings to the retirement market, some financial advisers say the firm is encroaching on their turf.

Gun violence hits investment strategies, sparks political debates with advisers

Screening out weapons companies has limited downside.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

If Finra eases firm oversight of outside business activities, broker-dealers could lose revenue

Brokerage firms would no longer be able to charge reps for supervising nonaffiliated RIAs.

Galvin charges Scottrade with DOL fiduciary rule violations

Action of Massachusetts' top regulator shows states can put teeth into a rule under review by the Trump administration.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print