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Investment advisers and private investment fund managers must meet a number of annual filing and/or reporting deadlines and other obligations in order to comply with federal securities laws. This Client Alert provides a summary of key compliance considerations for 2019. Note that the deadlines provided below are based upon an investment adviser or fund manager with a fiscal year-end of December 31. Any investment adviser or fund manager whose fiscal year-end falls on a date other than December 31 should carefully calculate their filing and/or reporting deadlines based on that date.

The regulation and compliance obligations discussed below are not exhaustive. A thorough review of the compliance obligations of any particular investment adviser or fund manager is beyond the scope of this Client Alert, given the unique operational characteristics of most investment advisers and fund managers. Please consult with the attorneys in our Investment Management Practice Group (IM Practice Group) regarding any additional obligations or filing and/or reporting deadlines that would apply.

Annual Compliance Reviews

Investment advisers registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), are required to conduct an annual review of their compliance programs for adequacy and the effectiveness of their implementation. This annual review should take into consideration whether your compliance program sufficiently addresses the applicable compliance requirements, as well as the risks associated with operations, investment strategy and securities offerings.[1]  At a minimum, your compliance program should include the following annual tasks:

General Annual Compliance Obligations

  • Collect annual compliance certifications from all “supervised persons” and “access persons” certifying that each has read and understood the compliance policies and procedures.
  • Obtain an annual personal securities holding report from each “access person”.[2]
  • Obtain annual “bad actor” re-certifications pursuant to Rule 506(d) of Regulation D.
  • Distribute an annual privacy notice to investors.
  • Review any compliance violations or incidents that occurred in the prior year and determine the effectiveness of your compliance policies and procedures in discovering and addressing each violation or incident. Revise your policies and procedures to the extent reasonably necessary to prevent such incidents in the future.
  • Review any compliance matters that the SEC or other regulatory authorities have highlighted as areas of concern for the upcoming year (i.e., cybersecurity preparedness and anti-money laundering programs), or any changes in the laws or regulations that may require a revision to your compliance policies and procedures, such as the changes to Form ADV disclosure requirements.
  • Review and comply with any annual certification, opinion requirements or other contractual obligations in counterparty agreements, side letters, credit facilities and other documents that require periodic reporting or notice.
  • Complete the required Department of Labor filings for ERISA benefit-plan clients or investors, as applicable.
  • Verify the eligibility of clients to participate in “new issues” of publicly offered securities, and identify “restricted persons” in order to properly restrict their participation.
  • Complete third-party annual audit of anti-money laundering (AML) programs under the Financial Crimes Enforcement Network (FinCEN) AML rules that became effective on July 11, 2016. The new customer due diligence requirements took effect on May 11, 2018.

Annually on or Before Anniversary of Previously Completed/ Filed Form

  • File a Form D with the SEC for private offerings claiming a securities exemption under Rule 504 or Rule 506.[3]
  • Complete state blue sky renewal filings, as applicable.
  • File an Annual Questionnaire for each category of registration to provide the National Futures Association (NFA) with information about the composition of its members and pay the annual NFA dues on the anniversary of the NFA membership date (for all NFA Members, including Commodity Pool Operators (CPOs) and Commodity Trading Advisors (CTAs)).
  • Internally review supervisory procedures and complete an annual Self-Examination Questionnaire to evaluate procedures on or before the anniversary date of the previously completed Self-Examination Questionnaire (for NFA members, including CPOs and CTAs). An appropriate CPO/CTA representative must sign a written attestation stating that the firm’s operations have been reviewed using the Self-Examination Questionnaire, which should be retained in the event that it is requested during an NFA exam.

Compliance Calendars and Checklists

The IM Practice Group highly recommends that each investment adviser and fund manager prepare a compliance calendar and checklist with the appropriate reporting and filing deadlines and compliance obligations applicable to their operations, investment strategy and securities offerings. Click here for a reference table as an example of a typical compliance calendar/checklist for an investment adviser or fund manager with a fiscal year-end of December 31.

[1] Several of the requirements found in this Client Alert may be applicable only to advisers that manage private investment funds.

[2] “Access persons” are any supervised persons who (1) have access to nonpublic information regarding any clients’ purchase or sale of securities or nonpublic information regarding the portfolio holdings of any reportable fund, or (2) are involved in making securities recommendations to clients or have access to such recommendations that are nonpublic. If providing investment advice is your primary business, all of your directors, officers and partners are presumed to be access persons. (See Rule 204A-1(e)(1) of the Investment Advisers Act of 1940, as amended.)

[3] Filing a termination notice is not currently required under Regulation D.  However, the SEC proposed changes to Regulation D that would require the filing of a termination Form D with the SEC within 30 days of the termination of the offering.  See SEC Release No. 33-9416, July 10, 2013, available here. We believe this rule will eventually be adopted by the SEC and that filing a Form D notice upon termination of an offering is best practice.

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Luis F. Ruiz

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