US Investment Advisers

Overview: 

Although state registration may apply to smaller US investment advisers, the majority of AIMA members who engage in investment advisory activities in the US are regulated by the US Securities and Exchange Commission (SEC). This regulation may take on different forms, depending on the activities and structure of the adviser; certain rules apply to all advisers, while others are specific to those fully registered with the SEC. Both registered and exempt reporting advisers benefit from AIMA’s advocacy and educational work. Workshops, webinars and online resources are available to all members and can be downloaded on demand.

Recent advocacy work includes topics such as marketing rules, climate change disclosures by corporates, proposed changes to position reporting (including short sales and synthetic positions), cross border application of European ESG disclosures to the public, insider trading enforcement, the impact of Chinese company delistings on minority shareholders, digital asset investment and valuation, alternative data usage, leverage relative to financial stability initiatives and regulatory harmonization. Members are encouraged to get involved in any of several working groups that focus on these and other issues affecting the investment advisory community at large.

Current work:

SEC Marketing Rule:  The SEC's new marketing rules came into effect on May 4, 2021 and registered investment advisers must comply by November 4, 2022.  Early compliance is possible but can only be complete compliance; selective early compliance is not permitted. 

AIMA, together with AIMA Sponsoring Partners ACA Compliance and Dechert, are in the process of developing an implementation guide to assist registered investment advisers in their efforts to come into compliance with the new marketing requirements.  Launch of implementation guide is expected in early November 2022.

SEC Asset Management Priorities: In mid-December, the SEC published its latest, and ambitious, regulatory flexibility agenda.  Among the many potential rulemakings include several noteworthy items that would impact AIMA members: 

  • Potential reforms to short sale disclosures;
  • Amendments to Form PF;
  • Updates to rules related to private fund advisers to improve transparency and address conflicts of interest;
  • Changes to both equity and Treasury market structures; and
  • Reproposed regulations and guidelines with respect to incentive-based compensation practices.

AIMA will continue to engage with the Commissioners, their staffs and agency staff on these and other potential rulemakings to stay apprised on their substance and progress and advocate our positions as necessary. 

SEC Form NP-X Amendments: In September 2021, the SEC issued a proposed rule that would amend Form NP-X under the Investment Company Act of 1940 to require mutual funds, ETFs and certain other funds that currently report annually about their proxy votes to detail each voting matter.  This detail would be provided along with ESG-related categories and subcategories and conform to a standardized format and form of reporting so that it is easier for the public to read and understand.  In addition, the funds would be required to disclose how securities lending activity affected their voting.  The Proposal would also require institutional investment managers who are subject to section 13(f) reporting to report annually on Form NP-X how they voted proxies related to say-on-pay matters, thereby subjecting them to the Form NP-X reproting requirements albeit in a more limited way than funds.  The amendments are intended to increase transparency for investors and "modernize" the reporting process. 

AIMA received input from members and filed its formal comment with the Commission on 14 December.  We broadly supported the proposed rule but suggested several revisions before it adopts a final rule.  Among other suggestions, we encouraged the Commission to:

  • limit the scope of managers required to file Form NP-X to only those that file Form 13F and also limit their disclosure requirements to only say-on-pay votes, as proposed;
  • revise the definition and framework regarding voting power to acknowledge the role of securities lending;
  • adopt a de minimis threshold for securities holdings considered for filing Form NP-X;
  • exempt managers that expressly state they do not vote their shares from the proposal's quantitative disclosure requirements; and
  • limit the scope of securities applicable for say-on-pay vote reporting to those held for a period greater than 30 days and filed on Form 13F and therefore exclude "section 12 securities" from the scope of securities applicable for say-on-pay vote reporting.

AIMA will stay apprised of any developments and when the SEC considers and issues a final rule. Click here to read AIMA's full comment letter

SEC Issues SBS Proposed Rulemaking:  On December 15, the SEC held an open meeting to consider several agenda items, one of which was a proposed rule that would: (i) prohibit fraud, manipulation and deception in connection with security-based swaps (SBSs); (ii) prevent undue influence over the chief compliance officer (CCO) of security-based swap dealers and major security-based swap participants (SBS entities); and (iii) require any person with a large SBS position to publicly report certain information related to the position (the "Proposal").  The Proposal includes re-proposed Rule 9j-1, new Rule 15Fh4-(c) and new Rule 10B-1.  The comment period closes 45 days after publication in the Federal Register, which, as of  24 January, has not yet occurred.  Click here to read more about each proposed rule. 

AIMA Responds to SEC Securities Lending Proposal:  On January 7, AIMA filed its response to the SEC's proposed rule that would require any person that loans a security on behalf of itself or another person to report the material terms of those securities lending transactions and related information regarding the securities the person has on loan and available to loan to a registered national securities association (“RSNA”) (the “Proposal”).  The Proposal would also require that the RNSA make available to the public certain information concerning each transaction and aggregate information on securities on loan and available to loan.

We encouraged the Commission to make several important changes to the Proposal prior to considering a final rule.  The Commission should:

  1. Limit the scope of the Proposal to the wholesale segment of the securities lending market;
  2. Revise its loan definition to exclude all customer short positions because short positions are not loans and should be addressed through a separate rulemaking:
  3. Eliminate its proposed 15-minute loan-by-loan reporting framework and instead publish aggregate, wholesale market loan data on a T+1 basis; and
  4. Incorporate a phased approach regarding the implementation of any final rule and seek a solution for the “day one problem,” i.e., existing loans not captured by a new reporting framework.

AIMA will stay apprised of any developments and when the SEC considers a final rule.  Click here to read AIMA's full comment letter. 

SEC proposes amendments to Form PF:  On January 26, the SEC proposed amendments to enhance private fund reporting on Form PF.  Large hedge fund advisers (i.e., $1.5 billion AUM or higher) would be required to file current reports within one business day of the occurence of one or more major reporting events. In light of the March 2020 and January 2021 market turmoil, a new Section 5 is added which covers a range of events and also incorporates objective tests to allow advisers to determine whether a report must be filed. These events include: (i) extraordinary investment losses; (ii) significant margin and default events; (iii) material changes in relationship with prime broker; (iv) changes in unencumbered cash; (v) operation events; (vi) withdrawals and redemptions; and (vii) explanatory notes.

According to the SEC, the amendments will provide them with the ability to assess systemic risk as well as to bolster its regulatory oversight of private fund advisers and its investor protection efforts. There will be a 30-day comment period following publication in the Federal Register. AIMA will seek input from members and intends to provide formal comment to the SEC.

Upcoming actions:

The SEC will hold its latest open meeting on January 26 to consider two items.  First, the Commission will consider whether to propose amendments to Form PF to require current reporting and amend reporting requirements.  Second, the Commission will consider whether to propose amendments to the definition of an exchange under the '34 Act and re-propose amendments to Reg ATS for ATSs that trade U.S. Government Securities, NMS stock and other securities to Reg SCI for ATSs that trade U.S. Government Securities. 

AIMA will review these proposals to determine whether and to what extent members may be impacted.  If necessary, we will convene AIMA working groups to gather member feedback and formulate possible comment responses. 

(Last updated: January 28, 2022)


Other related workstreams

Reporting

AIMA's advocacy focuses on the improvement of a more efficient and streamlined reporting framework across the reporting regimes. The European Commission published a proposal for a European Single Access Point and outlined its Supervisory Data Strategy, introducing a range of new initiatives and actions to improve EU-wide regulatory reporting. The SEC has proposed amendments to Form PF which now requires large hedge fund advisers to report information on key events within one business day.

Responsible Investment

AIMA's resources for implementing responsible investment (also known as 'ESG') and interpreting the relevant regulation. Notable research papers and relevant events are also linked.