The SEC today proposed requiring money managers to file easy-to-understand narratives of their business practices and conflicts electronically at the agency so they can be viewed on the SECs website.
The enhanced Part 2 Form ADV brochures the SEC proposed would give potential clients immediate Internet access to critical information about the kind of services a money manager offers, the fees it charges and the conflicts of interest a manager faces. It also would require money managers to describe their soft-dollar practices and document any disciplinary actions that have been taken against them, including any violations of the security laws.
Much of that information is already required in existing paper versions of Part 2 Form ADV, which is not filed electronically at the SEC or available on the agencys website.
Under todays proposal, new information would include:
• descriptions of the conflicts of interests that could arise when a money manager represents hedge funds and other clients that pay performance fees at the same time the manager represents clients who dont pay performance fees;
• disclosure of commissions a manager receives for recommending a financial product; and
• recaps of the qualifications of a managers advisers.
This is going to be a major development for all investment advisers, said David Tittsworth, executive director of the Investment Adviser Association, a lobbying organization for investment advisers. Until we see the proposal, we cant say how burdensome or how detailed the disclosure will be.
Todays proposal updated one originally unveiled by the SEC in 2000 focused only on electronic filing. John Heine, an SEC spokesman, said the public would have 60 days to comment on the proposal after it is published in the Federal Register. Mr. Heine said it was unclear when the proposal would be published.