As the new year is upon us, there are some important annual compliance obligations Investment Advisers either registered with the Securities and Exchange Commission (the “SEC”) or with a particular state (“Investment Adviser”) should be aware of.

See upcoming deadlines below and in red throughout this document.

The following is a summary of the primary annual or periodic compliance-related obligations that may apply to Investment Advisers. The summary is not intended to be a comprehensive review of an Investment Adviser’s securities, tax, partnership, corporate or other annual requirements, nor an exhaustive list of all of the obligations of an Investment Adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) or applicable state law. Although many of the obligations set forth below apply only to SEC-registered Investment Advisers, state-registered Investment Advisers may be subject to similar and/or additional obligations depending on the state in which they are registered. State-registered Investment Advisers should contact us for additional information regarding their specific obligations under state law.

  • List of annual compliance deadlines in chronological order:

Click here to see table.

  • What’s New?

SEC Presence Exams

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has announced a new initiative to conduct focused, risk-based examinations (“Presence Exams”) of investment advisers to private funds that recently registered with the SEC. We have previously discussed the Presence Exams in an article posted at our Investment Fund Law Blog -

Enforcement Priorities in the Alternative Space

In his speech on December 18, 2012, Mr. Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit (“AMU”), discussed the risks to hedge fund investors and the need for vigilant enforcement oversight. He emphasized that AMU will look at the issues it investigates through the lens of fiduciary duty, and discussed the types of misconduct by hedge fund managers in violation of their fiduciary duties to their clients.

Of the number of actions against hedge fund managers, a majority of them involved conflicts of interest, valuation, performance, and compliance and controls (such as fraudulent or weak valuation practices, related-party and other self-serving transactions, preferential rights given to investors through side letters, lack of independent governance, and misrepresentations about “skin in the game” or managers’ alignment of interests with investors). The AMU has developed risk-based investigative approaches utilizing data analysis and appropriate risk criteria to identify those that may be engaged in fraudulent conduct.

Form PF

Many Investment Advisers will need to file their first Form PF this year. The deadline for advisers required to file Form PF within 120 days after the December 31, 2012 fiscal year end is April 30, 2013. See more detailed information about Form PF below.

CFTC Rules—CPO and CTA Registrations , Exemptions and Filings

Deadline to affirm your CPO exemption: March 1, 2013

In a February 9, 2012 Final Rule, the CFTC rescinded Section 4.13(a)(4), which provided private pools with an exemption from registration as a commodity pool operator (“CPO”) with the CFTC. Investment Advisers operating 3(c)(7) private funds are no longer able to claim exemption from CPO registration for funds offered only to institutional qualified eligible purchasers (“QEP”) and natural persons that meet QEP requirements that hold more than a de minimis amount of commodity interests. The exemption under Section 4.13(a)(3) was retained, which provides exemption from CPO registration in cases where the pool trades minimal amounts of futures and covered swap positions such that at all times either (a) the aggregate initial margin and premiums required to establish the fund’s commodity interest positions may not exceed 5% of the fund’s liquidation value or (b) the aggregate notional value of the fund’s commodity interest positions may not exceed 100% of the fund’s liquidation value (de minimis exemption).”

Advisers that had relied on the Section 4.13(a)(4) exemption had until December 31, 2012 to either avail themselves of the de minimis exemption or other applicable exemptions and file a notice of exemption with the National Futures Association (“NFA”) or register as a CPO, i.e., both 3(c)(1) or 3(c)(7) pools should now comply with the de minimis exemption or register. Advisers who relied on an exemption and filed a notice with the NFA must affirm the exemption annually within 60 days after the end of the calendar year. Failure to affirm the exemption will result in the exemption being withdrawn at the end of the 60-day affirmation period. Accordingly, those who filed a notice of exemption by December 31, 2012 have until March 1, 2013 to affirm the exemption or face losing their exemption. To obtain information about the annual affirmation process and filing, please visit the NFA website.

Note that, in assessing whether your activities keep you within the de minimis exemption, the following instruments generally fall under the definition of “commodity interests:”

  • Futures and Commodities. (Other than futures on single securities—see below.)
  • Swaps and Other Commodity Interests. As a general rule, any instruments based on interest rates, monetary rates or yields are swaps subject to CFTC regulation.1
  • Mixed Swaps and Security-Based Swap Agreements. Security-based swap agreements include, for example, swaps on a broad-based security index. Mixed swaps include, for example, swaps on a single security where the counterparties embed interest-rate optionality or a non-security component.

Instruments that are generally not “commodity interests and do not fall under CFTC regulation:

  • Security-based swaps: swaps on a single security; credit default swaps based on a single reference obligation; futures on a single security or a single loan; and swaps on narrow-based securities indices (those with nine or fewer component securities and subject to certain weighting requirements).2


Deadline for filing Form CTA–PR for December 31, 2012 year end: February 14, 2013

CFTC Regulation 4.27 requires that all CTC-registered CTAs and members of the NFA file a Form PR by February 14, 2013.

Form PR requires each CTA to report on a quarterly basis general information about the CTA, its trading programs, any pool assets and the identity of the CPOs operating the pools. Form PR must be filed within 45 days after the quarters ended March, June and September and within 45 days of the calendar year end. Form PR filing does not eliminate the requirement to file a Form PF. SEC-registered investment advisers may also be required to file their initial Form PF filings by April 30, 2013.

The Form PR report for the year ended December 31, 2012 will be due by February 14, 2013 and must be filed electronically using NFA’s EasyFile System accessed at: The CTA’s security manager must first set up security settings in order to access the EasyFile System.


The following are the filing requirements for registered CPOs:

  • Small CPOs (less than $150 million pool AUM) must file Form CPO-PQR Schedule A on an annual basis within 90 days of the calendar year-end.
  • Mid-size CPOs ($150 million to $1.5 billion pool AUM) must file Form CPO-PQR Schedules A and B on an annual basis within 90 days of the calendar year-end.
  • Large CPOs (at least $1.5 billion pool AUM) must file Form CPO-PQR Schedules A, B and C on a quarterly basis within 60 days of each calendar quarter-end.

CPOs that file Form PF and include information on all relevant pools in Form PF need only file Schedule A.

  • Continuing Compliance Areas

Fund IARD Account

An Investment Adviser must ensure that its IARD account is adequately funded to cover payment of all applicable adviser registration renewal fees and notice filing fees. SEC-registered advisers and Exempt Reporting Advisers (ERA) must pay their annual IARD fees before submitting their annual Form ADV amendment by March 31. The annual IARD fee of an SEC-registered adviser is based on the adviser’s AUM. The annual fee of an ERA is $150. SEC-registered advisers pay their state notice filing fees and state investment adviser representative fees during the IARD’s renewal program in November – December of each year. State-registered advisers also pay their annual fees during the IARD’s renewal program in November – December of each year.

For Form PF filers, your IARD account must also be funded with the annual ($150) or quarterly ($150) fees before submitting Form PF.

Form ADV Updates and Distribution

Annual Updates. An Investment Adviser must file an annual amendment to Form ADV Part 1 and Form ADV Part 2 within 90 days of the end of its fiscal year. Part 1 and Part 2A of the Form ADV must be filed with the SEC through the electronic IARD system. Accordingly, if you are SEC-registered adviser whose fiscal year ends on or after December 31, 2012, you must file Part 1A and Part 2A Brochure as part of your annual updating amendment by March 31, 2013. If you are a state-registered adviser whose fiscal year ends on or after December 31, 2012, you must also file Part 1A, Part 1B, Part 2A Brochure and 2B Brochure Supplement as part of your annual updating amendment by March 31, 2013. We note that the current Form ADV Part 1 now contains a uniform method of calculating AUM, and eliminates adviser discretion in including or excluding certain assets from the AUM calculation.

Brochure Rule. On an annual basis, an Investment Adviser must provide its clients with a copy of its updated Form ADV Part 2A, or provide a summary of material changes and offer to provide an updated Form ADV Part 2A. An adviser could meet its delivery obligation to a hedge fund client by delivering its brochure to a legal representative of the fund, such as the fund’s general partner. Delivery is required within 120 days of the end of the adviser’s fiscal year, or by April 30, 2013.

Ongoing Updates. Investment Advisers must amend Part 1 of their Form ADV promptly during the year if certain information becomes materially inaccurate. The brochure and supplement must also be updated promptly during the year if any information becomes materially inaccurate unless the material inaccuracies result solely from changes in the amount of client assets managed or changes to the fee schedule.

State Notice Filings/Investment Adviser Representatives

An Investment Adviser should review its advisory activities in the various states in which it conducts business and confirm that all applicable notice filings are made on IARD. In addition, an Investment Adviser should confirm whether any of its personnel need to be registered as “investment adviser representatives” in any state and, if so, register such persons or renew their registrations with the applicable states.

Annual Assessment of Compliance Program.

At least annually, an Investment Adviser must review its compliance policies and procedures to assess their effectiveness in preventing fraud and other violations. The review should be conducted with special focus on the Investment Adviser’s specific business model and operating environment and any changes to it during the reviewed year, and all the actual and potential conflicts of interest that might result from that business model and those changes. The annual assessment process should be documented and those document(s) should be presented to the Investment Adviser’s chief executive officer or executive committee, as applicable, and maintained in the Investment Adviser’s files. At a minimum, the annual assessment process should entail a detailed review of:

  • Conflicts of Interest – for example, valuation practices, accuracy of document disclosures, marketing documents and performance disclosures, favorable terms / side letters, personal trading, allocation practices, undisclosed compensation arrangements, soft-dollars, best execution, and affiliated transactions;
  • Valuation practices and procedures – with special focus on the Tier 2 and 3 positions.
  • Internal Violations and Changes – any violations of policies and procedures that arose during the year, changes in the Investment Adviser’s business activities and changes in applicable law;
  • Code of Ethics, --including an assessment of the effectiveness of its implementation and determination of whether it should be enhanced in light of the Investment Adviser’s current business practices;
  • Trading / Investment Restrictions;
  • Side Letters and other special/favorable terms policies and procedures;
  • Subscription Applications – test for accurate completion and investor eligibility in light of changes to accredited investor and qualified client standards;
  • ERISA – test calculations related to ownership percentages of benefit plans and entity investors that are plan assets funds;
  • Marketing Documents and Performance Presentations – test accuracy of disclaimers and footnotes and adequacy of records;
  • Business Continuity/Disaster Recovery plan -- which should be “stress tested” and adjusted as necessary;
  • Social Media policies and procedures -- which the SEC recommends all Investment Advisers adopt as part of their compliance policies and procedures;
  • Whistleblower policies and procedures -- which should promote employee reporting of violations; and
  • Any other area specific to the Investment Adviser.

Offering Materials

As a general securities law disclosure matter, and for purposes of U.S. federal and state anti-fraud laws, including Rule 206(4)-8 of the Advisers Act, an Investment Adviser must continually ensure that each of its fund offering documents is kept up to date, is consistent with its other fund offering documents and contains all material disclosures that may be required in order for the fund investor to be able to make an informed investment decision.

Full and accurate disclosure is particularly important in light of Sergeants Benevolent Assn. Annuity Fund v. Renck, 2005 NY Slip op. 04460, a New York Appellate Court decision, where the court held that officers of an investment adviser could be personally liable for the losses suffered by a fund that they advised if they breached their implied fiduciary duties to the fund. The fiduciary nature of an investment advisory relationship and the standard for fiduciaries under the Advisers Act includes an affirmative duty of utmost good faith, and of full and fair disclosure of all material facts, and an affirmative obligation to use reasonable care to avoid misleading clients.

Accordingly, it may be an appropriate time for an Investment Adviser to review its offering materials and confirm whether or not any updates or amendments are necessary. In particular, an Investment Adviser should take into account the impact of the recent market conditions on its funds and review its funds’ current investment objectives and strategies, valuation practices, performance statistics, redemption or withdrawal policies, risk factors (including disclosures regarding market volatility and counterparty risk), current personnel, service providers and any relevant legal or regulatory developments.

Annual Privacy Notice

Under SEC Regulation S-P, an Investment Adviser must provide its fund investors or clients who are natural persons notice of the Investment Adviser’s privacy policy on an annual basis, even if there are no changes to the privacy policy.

New Issues

Investment Advisers should address FINRA Rule 5130 and Rule 5131. Rule 5131, which became effective in May 2011, prohibits quid pro quo and “spinning” allocations of new issues of securities and addresses book-building, new issue pricing, penalty bids, trading, and waivers of lock-up agreements by member firms and associated persons. An Investment Adviser that acquires “new issue” IPOs for a fund or separately managed client account must obtain written representations every 12 months from the fund or the account’s beneficial owner confirming their continued eligibility to participate in new issues. This annual representation may be obtained through “negative consent” letters.

Custody; Annual Audit or Surprise Audit Private fund Investment Advisers should have their funds audited by a PCAOB registered independent account and provide audited financial statements of their fund(s), prepared in accordance with U.S. generally accepted accounting principles, to the fund(s)’ investors within 120 days of the end of the funds’ fiscal year. Investment Advisers that do not have their private funds audited should determine whether they are deemed to have custody of those funds’ assets and therefore are subject to an annual surprise audit and other requirements.

Anti-Money Laundering

An Investment Adviser is subject to the economic sanctions programs administered by OFAC and should have an anti-money laundering program in place. An Investment Adviser should review its anti-money laundering program on an annual basis to determine whether the program is reasonably designed to ensure compliance with applicable law given the business, customer base and geographic footprint of the Investment Adviser.

“Pay-to-Play.” Investment Advisers should review any political contributions and any activity by the Investment Adviser’s personnel that may trigger lobbyist registration, as well as its related policies and procedures. The SEC adopted two measures on June 30, 2010 to prevent “pay-to-play” practices by Investment Advisers seeking to manage funds for state and local governments (which may have their own lobbying or “pay-to-play” rules and regulations). The SEC adopted amendments to these rules in 2011. The amendments cover a multitude of topics, including the prohibition of soliciting or coordinating campaign contributions from others for elected officials in a position to influence the selection of the adviser.

With regard to California, generally employees of “external managers” fall under the definition of “placement agent” requiring lobbyist registration. There are exceptions. One that may be helpful to hedge fund managers requires a portfolio manager-type to be involved in marketing to covered entities in order to be exempt from lobbyist registration. Specifically, employees (i.e., partners, members, etc.) who spend at least 1/3 of their time during a calendar year managing assets will not fall under the “placement agent” definition and may solicit from California state public plans.

Liability Insurance

Due to an environment of increasing investor lawsuits and regulatory scrutiny of fund managers, an Investment Adviser may want to consider obtaining management liability insurance or review the adequacy of any existing coverage, as applicable.

  • Securities and Other Forms Filings

Form 13F

Deadline for filing Form 13F for the December 31 quarter: February 14, 2013

An “institutional investment manager,” whether or not an (SEC or state-registered) Investment Adviser, must file a Form 13F with the SEC if it exercises investment discretion with respect to $100 million or more in securities subject to Section 13(f) of the Exchange Act (e.g., exchange-traded securities, shares of closed-end investment companies and certain convertible debt securities), which discloses certain information about such its holdings. The first filing must occur within 45 days after the end of the calendar year in which the Investment Adviser reaches the $100 million filing threshold and within 45 days of the end of each calendar quarter thereafter, as long as the Investment Adviser meets the $100 million filing threshold.

Form 13H

Deadline for filing an annual Form 13H: February 14, 2013

The SEC adopted Rule 13h-1 under the Exchange Act which requires “Large Traders” meeting certain definitional thresholds in transactions in NMS securities to identify themselves to the SEC and make certain disclosures to the SEC on Form 13H, effective October 3, 2011. “Large Traders” are defined as any person that exercises investment discretion over one or more accounts and effects transactions of NMS securities for or on behalf of such accounts, in an aggregate amount of at least $20 million in a day or $200 million in a month. In addition to an initial filing, all large traders must submit an annual filing on Form 13H within 45 days after the end of the calendar year and submit any amendments promptly after the end of any calendar quarter where information in the form becomes materially inaccurate.

Form PF

Deadline for filing Form PF (for advisers required to file within 120 days after December 31, 2012 fiscal year end): April 30, 2013

The SEC and the Commodity Futures Trading Commission (“CFTC”) jointly adopted reporting rules on October 31, 2011. The SEC rule under the Advisers Act requires Investment Advisers that advise one or more private funds and have at least $150 million in private fund AUM to file the Form PF with the SEC. The CFTC rule requires CPOs and commodity trading advisors registered with the CFTC to satisfy specific filing requirements with respect to private funds by filing the Form PF with the SEC in certain circumstances. The Form PF has quarterly and annual filing requirements based on a number of factors, including amounts and types of assets.

  • Large hedge fund advisers3 must file the Form PF within 60 days of each fiscal quarter end.
  • Large liquidity fund advisers4 must file the Form PF within 15 days of each fiscal quarter end.
  • All other filers5 must file the Form PF within 120 days of each fiscal year end.

For additional information about Form PF, check out the SEC’s Frequently Asked Questions on Form PF.

Schedules 13G or 13D

Deadline for filing annual amendment to Schedule 13G: February 14, 3013

An Investment Adviser whose client or proprietary accounts, separately or in the aggregate are beneficial owners of 5% or more of a registered voting equity security, and who have reported these positions on Schedule 13G, must update these filings annually within 45 days of the end of the calendar year, unless there is no change to any of the information reported in the previous filing (other than the holder’s percentage ownership due solely to a change in the number of outstanding shares). An Investment Adviser reporting on Schedule 13D is required to amend its filings “promptly” upon the occurrence of any “material changes.” In addition, an Investment Adviser whose client or proprietary accounts are beneficial owners of 10% or more of a registered voting equity security must determine whether it is subject to any reporting obligations, or potential “short-swing” profit liability or other restrictions, under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Section 16 Filings

Individuals or entities that beneficially own ten percent of any class of equity securities registered under Section 12 of the Exchange Act, and officers or directors of the issuers of these securities, may be required to file Forms 3, 4, and 5 regarding their ownership of and transactions in these securities.

FBAR Reporting

Deadline for filing FBAR Form TD F 90-22.1 for 2012 calendar year: June 30, 2013

A U.S. person is required to file a Report of Foreign Bank and Financial Accounts (“FBAR”) if he has a financial interest in or signature authority over a foreign bank, securities or other financial account (e.g., a prime brokerage account) in another country if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. Failure to file this form when required can result in significant penalties. Financial accounts that may be subject to FBAR reporting include accounts of a mutual fund or similar pooled fund which issues shares available to the general public that have a regular net asset value determination and regular redemptions. Private offshore funds, such as hedge funds and private equity funds (e.g., a Cayman Island “mutual fund”) are not deemed to be a foreign financial account, and therefore investment advisers are not required to file an FBAR with respect to these funds. However, if these private funds have either a foreign bank account, foreign prime brokerage account, or other foreign financial account, and the adviser has signature authority over those accounts, then the adviser may have to file an FBAR with respect to those accounts.

FBAR can now be filed electronically via FinCEN’s BSA E-Filing system. For additional information on filing FBAR, check out the IRS’ FAQs Regarding FBAR – Filing Requirements.


Foreign Account Tax Compliance Act (FATCA), comprising of sections 1471 through 1474 (Chapter 4) of the Internal Revenue Code, was enacted in March 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA imposes information reporting requirements on foreign financial institutions (FFIs) and withholding, documentation, and reporting requirements with respect to certain payments made to certain foreign entities. In July 2011, the IRS released a notice that provided and described the timeline for FFIs and withholding agents to implement the various FATCA requirements. The Treasury Department and the IRS have published proposed regulations under Chapter 4. The Treasury Department has also released models for bilateral agreements (Model 1 Agreement and Model 2 Agreement) with other jurisdictions under which FFIs would satisfy their Chapter 4 requirements and it intends to complete intergovernmental agreements based on the model agreements. In October 2012, the IRS released Announcement 2012-42 which outlines new timelines (starting January 1, 2014) for FFIs and withholding agents to complete due diligence and other requirements. The Treasury Department and the IRS intend to incorporate the rules described in the Announcement in final regulations under Chapter 4.

Treasury International Capital System (“TIC”) Forms:

  • TIC Form SLT—Aggregate Holdings of Long-Term Securities by U.S. and Foreign Residents. Adopted in 2011, the Form SLT is required to be submitted by entities with consolidated reportable holdings and issuances with a fair market value of at least $1 billion as of the last day of any month. The first filing was required to be submitted by January 23, 2012 for consolidated data as of December 31, 2011. Form SLT must be filed no later than the 23rd calendar day of the month following the report as-of date. Form SLT applies to all U.S.-resident custodians (including U.S.-resident banks), U.S.-resident issuers (such as a U.S. fund) and U.S.-resident end-investors (such as a U.S. investment adviser, whether or not registered).
  • TIC Form SHC—Report of U.S. Ownership of Foreign Securities, Including Selected Money Market Instruments. Form SHC is required approximately every 5 years. The Form SHC is a mandatory survey of the ownership of foreign securities, including selected money market instruments, by U.S. residents as of December 31, 2011. The form must be submitted by fund managers and other entities required to do so no later than March 2, 2012. Form SHC is mandatory for all U.S.-resident custodians and end-investors that (1) have holdings in foreign securities that meet the reporting thresholds or (2) are notified by the Federal Reserve Bank of New York as fiscal agent for the U.S. Treasury Department, that they are required to submit the Form SHC. For purposes of this form, “U.S. resident” is defined as any individual, corporation or other entity incorporated or legally established in the United States, including branches, subsidiaries and affiliates of foreign entities located in the United States.

U.S.-resident custodians must report both foreign portfolio securities held in safekeeping for other U.S. residents and invested for their own portfolios. U.S.-resident end-investors must report all foreign securities invested for their own portfolios or for the portfolios of U.S.-resident clients. End-investors are entities such as (but not limited to): financial and non-financial organizations; managers of private and public pension funds; managers/sponsors of mutual funds, hedge funds, private equity companies, and other pooled funds and private investment vehicles; insurance companies; foundations; universities; trusts and estates; and funds and similar entities that own shares or units of, or other portfolio equity interests in, a foreign related or non-related entity.

  • TIC Form SHCA—Annual Report of U.S. Ownership of Foreign Securities, Including Selected Money Market Instruments. Form SHCA is the annual report that must be filed only by entities that were notified by the FRBNY. Entities not contacted by the FRBNY are not required to report. Those required to report on Form SHCA were determined based on the level of U.S. holdings of foreign securities reported on the December 2011 benchmark survey on Form SHC. These entities consist primarily of the largest reporters on the December 2011 Form SHC survey. Form SHCA report must be filed to the FRBNY by March 1, 2013.

Blue Sky Filings/Form D

Many state securities “blue sky” filings expire on a periodic basis and must be renewed. Accordingly, now may be a good time for an Investment Adviser to review the blue-sky filings for its fund(s) to determine whether any updated filings or additional filings are necessary. We note that all Form D filings for continuous offerings will need to be amended with the SEC on an annual basis.