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Form ADV FAQs Impact Cross-Border Investment Managers

The SEC’s Division of Investment Management has released additional Form ADV FAQs that affect cross-border investment managers.  The staff advises that non-U.S. investment funds, including UCITs or their equivalent, should be classified as “pooled investment vehicles” when describing assets.  Also, a non-resident GP or managing agent of a relying adviser must file Form ADV-NR.  The FAQs also broadly define “borrowings” for purposes of whether an adviser engages in borrowing transactions on behalf of clients, explain social media disclosure, and clarify that the new Form supersedes SEC no-action relief with respect to relying advisers.

OUR TAKE: The SEC continues to take an extra-territorial regulatory approach to any cross-border adviser that must register in the U.S.

https://www.sec.gov/investment/im-info-2017-04.pdf

Multi-National Advisers Should Send Email Notice to SEC

The staff of the SEC’s Division of Investment Management has issued guidance on how multi-national firms can ensure compliance with the Advisers Act without subjecting all non-U.S. operations to U.S. regulation.  For many years, firms have relied on the Unibanco doctrine, whereby a non-U.S. affiliate can share resources with a registered investment adviser so long as the firm complies with several conditions including subjecting books and records to SEC review and appointing an agent for service of process.  In this guidance, the SEC recommends that firms email the SEC with the Unibanco undertakings.

OUR TAKE: This is an unusual process.  Ordinarily, a firm seeking to rely on no-action relief would assert (and demonstrate) compliance if questioned by regulators.  Apparently, in the Unibanco context, the SEC staff wants registrants to proactively make this informal email filing in order to rely.  It is unclear whether firms would not be able to rely if they decline or fail to email the undertakings to the SEC.

https://www.sec.gov/investment/im-info-2017-03.pdf