Form ADV

Form ADV is the uniform form used by investment advisers that manage at least $25 million in assets to register with both the SEC and state securities authorities. The Form ADV is divided into 3 parts. Part 1 is a fill-in-the blank form that contains information about the investment advisory business and how it operates. Part 2 is a brochure in narrative form that include plain English disclosures of the adviser’s business practices, fees, conflicts of interest, and disciplinary information. The last part is Part 3, which contains the relationship summary, which investment advisers are required to deliver to retail investors that discloses certain information about the firm.

Part 1

Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. This part is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to manage its regulatory and examination programs.

Part 1A

Part 1A asks a number of questions about the investment adviser, its business practices, the persons who own and control the firm, and the persons who provide investment advice on behalf of the firm. All advisers registering with the SEC or any of the state securities authorities must complete Part 1A.

Part 1A also includes a few supplemental schedules:

  • Schedule A: Asks for information about the direct owners executive officers/control persons.
  • Schedule B: Asks for information about the indirect owners.
  • Disclosure Reporting Pages (DRPs): Are schedules that ask for detail about the disciplinary events involving the adviser or advisory affiliates.

Part 1B

Only investment advisers registering with any of the state securities authorities are required to file Part 1B of Form ADV. This part consists of additional questions required by state securities authorities.

Part 2

Part 2 requires investment advisers to prepare narrative brochures that include plain English disclosures of the adviser’s business practices, fees, conflicts of interest, and disciplinary information. The brochure is the primary disclosure document for investment advisers and must be delivered to advisory clients. State registered advisers must file Part 2A and Part 2B with the Administrator of each state they are registered in.

Part 2A

Part 2A requires advisers to create brochures in narrative form and in plain English containing information about the advisory firm. This part focuses on customer related information such as compensation arrangements, types of clients, and types of investments. The requirements in Part 2A apply to all investment advisers registered with the SEC or the states.

Part 2B

Part 2B is called the “brochure supplement” and includes information about the specific individuals, acting on behalf of the investment adviser, who actually provide the investment advice and interact with the client. The requirements in Part 2B apply to all investment advisers registered with the SEC and most of the states.

Part 3

Part 3, the “relationship summary,” requires SEC-registered investment advisers that offer services to retail investors to prepare a brief plain English summary about the types of services the adviser offers, the fees and costs clients will have to pay for those services, the conflicts of interest the adviser may have, the required standard of conduct, any legal and disciplinary history,  key questions to ask the adviser, and references to where clients can find more detailed information about the adviser and the services they offer.

For more information on Form ADV, check out our Part 2A of Form ADV: Firm Brochure blog being posted soon to our blog page. Also check out our blogs on investment adviser registration: When Do You Have to Register as an Investment Advisor?, Exclusions from the Definition of Investment Advisor, Federal Exemptions from Investment Advisor Registration, and more.

If you need assistance filing or updating your Form ADV, please contact us. MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting your firm’s compliance responsibilities.