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Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Rules and Regulations
the final rule 20641b4ii.1064 Each of these records will be required to be maintained in the same manner, and for the same period of time, as other books and records required to be maintained under rule 2042a.
As discussed above, there are approximately 545 small advisers currently registered with us, and we estimate that 100 percent of advisers registered with us will be subject to amendments to the books and records rule. As discussed above in our Paperwork Reduction Act Analysis in section IV.D above, the amendments to rule 2042 under the Advisers Act will increase the annual burden by approximately 18.44 hours per adviser, or 10,049.8 hours in aggregate for small advisers.1065 We therefore believe the annual monetized aggregate cost to small advisers associated with our amendments will be $6,960,596.1066

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3. Final Amendments to Form ADV
Final amendments to Form ADV will impose certain reporting and compliance requirements on certain investment advisers, including those that are small entities, requiring them to provide information about their use in its advertisements of performance results, previous investment advice, testimonials, endorsements, and thirdparty ratings. The final amendments, including recordkeeping requirements, are summarized above in this FRFA
section V.A. All of these final requirements are also discussed in detail, above, in section II.I, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections III and IV the Economic Analysis and Paperwork Reduction Act Analysis and below. The professional skills required to meet these specific burdens are also discussed in section IV.
Our Economic Analysis, discussed in section III above, discusses these costs and burdens for respondents, which include small advisers. As discussed above in our Paperwork Reduction Act Analysis in section IV.E above, the final amendments to Form ADV will increase the annual burden for advisers other than exempt reporting advisers, who will not be required to respond to the new Form ADV questions by approximately 0.5 hours per adviser, or 272.5 hours in aggregate for small advisers other than exempt reporting 1064 See
final rule 2042a15i through ii.
hour 545 small advisers = 10,049.8

1065 18.44

hours.
1066 545 registered investment advisers 201.44
hours = 109,784.8 hours. 17% 109,784.8 hours $70 + 83% 109,784.8 hours $62 =
$6,960,596.

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advisers.1067 We therefore expect the annual monetized aggregate cost to small advisers other than exempt reporting advisers, for whom there will be no additional cost associated with our final amendments will be $74,392.50.1068
F. Duplicative, Overlapping, or Conflicting Federal Rules 1. Final Rule 20641
Other than existing rule 20641 and the prohibitions contained in section 208ac of the Act, investment advisers do not have obligations under the Act specifically for adviser advertisements. As discussed above in section II.A.4., we recognize that advisers to private funds, who would be included in the scope of the final rule 20641, are prohibited from making misstatements or materially misleading statements to investors under rule 20648.1069 Although the final marketing rule may overlap with the prohibitions in rule 20648 in certain circumstances, just as it overlaps with section 206 with respect to an advisers clients and prospective clients, we believe it is important from an investor protection standpoint to delineate these obligations to all investors in the advertising context and provide a framework for an advisers advertisements to comply with these obligations. We also understand that many private fund advisers already consider the current staff positions related to the current advertising rule when preparing their marketing communications. As a result, we believe that our application of the final rule to advertisements to private fund investors would result in limited additional regulatory or compliance costs for many of these advisers.
We also recognize that advisers have other compliance oversight obligations under the Federal securities laws, including the Act. For example, advisers are subject to the Acts compliance rule, which we adopted in 2003.1070
Therefore, when an adviser utilizes a promoter as part of its business, the adviser must have in place under the 1067 38.97

hour 545 small advisers = 21,238.6

hours.
1068 272.5 hours $273 = $74,392.50. See supra footnote 1053 for a discussion of who we believe would perform this function, and the applicable blended rate.
1069 There may be other legal protections of investors from fraud. See, e.g., section 17a of the Securities Act, as well as section 10b of the Exchange Act and rule 10b5 thereunder.
1070 See supra footnote 371 and accompanying text. The compliance rule contains principles based requirements for advisers to adopt compliance policies and procedures that are tailored to their businesses. Id.

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Acts compliance rule policies and procedures that address this relationship and are reasonably designed to ensure that the adviser is in compliance with the final rule. We believe the final rules adviser oversight and compliance provision applicable to testimonials and endorsements will work well with the Acts compliance rule, as both are principles-based and will allow advisers to tailor their compliance with the final rule as appropriate for each adviser. There are no duplicative, overlapping, or conflicting Federal rules with respect to the final amendments to rule 2042.
With respect to testimonials and endorsements, our amendments to rule 20641 will eliminate some regulatory duplication. For example, rule 20643
has had a duplicative requirement that a solicitor deliver to clients the advisers Form ADV brochure, even though advisers are already required to deliver their ADV brochures to their clients under rule 2043. To the extent that both advisers and solicitors currently deliver the advisers Form ADV
brochure, the final rule will reduce the redundancy of disclosures. In addition, as discussed above, the final rules disqualification provisions will apply to situations in which an adviser compensates a person, directly or indirectly, for a testimonial or endorsement. This includes persons who provide testimonials or endorsements to private fund investors such as broker-dealers. Such brokerdealers may also be subject to the statutory disqualification provisions under the Exchange Act. To the extent that a person is subject to both disqualification provisions, there would be some overlapping categories of disqualifying events i.e., certain bad acts would disqualify a person under both provisions. For instance, certain types of final orders of certain Federal and foreign regulators would be disqualifying events under both provisions. Accordingly, as discussed above, we are providing an exemption from the disqualification provisions for registered broker-dealers that are subject to and complying with the statutory disqualification provisions under the Exchange Act.
We understand that some promoters will also be subject to the bad actor disqualification requirements, which disqualify securities offerings from reliance on exemptions if the issuer or other relevant persons such as underwriters, placement agents and the directors, officers and significant shareholders of the issuer have been convicted of, or are subject to court or administrative sanctions for, securities
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