Compliance Solutions for Investment Advisers

FAQs — Form ADV

 

What is Form ADV?

Form ADV (or The Uniform Application for Investment Adviser Registration) is used as the official application document to register as an investment adviser. Both the SEC and the state securities regulators require use of the Form ADV as an investment adviser registration document. Once investment adviser registration is granted, the Form ADV must be amended at least annually and whenever material changes occur.

What are the different Parts of Form ADV?

Form ADV is comprised of four Parts:

  • Part 1A – must be completed by all advisers registering with the SEC or any state securities authority.
  • Part 1B – asks additional questions required by state securities authorities.
  • Part 2A – requires advisers to create a narrative brochure containing information about the advisory firm.
  • Part 2B – requires advisers to create brochure supplements containing information about certain supervised persons.

What type of information is an investment adviser required to disclose in Part 1A?

Part 1A requires an adviser to provide the following information:

  • Basic contact information (e.g., the adviser’s legal and “doing business as” names, name of contact person, office address and telephone number, office hours, location of books and records);
  • The basis for the investment adviser’s SEC registration (e.g., large advisory firm, multi-state adviser, Internet adviser, pension consultant, etc.);
  • The states wherein an SEC registered investment adviser will request notice filing;
  • The adviser’s corporate structure (e.g., limited liability company, corporation, sole proprietorship, etc.), fiscal year and where the entity was formed;
  • Number and types (e.g., investment adviser representatives, registered representatives) of employees;
  • Types and number of investment advisory clients;
  • The advisory firm’s investment advisory fee and compensation arrangements;
  • The amount of regulatory assets under management;
  • The types of investment advisory services the firm provides;
  • The investment advisor’s other business activities;
  • Financial industry affiliations of the adviser’s related persons;
  • The investment adviser and its related persons’ involvement in client transactions (such as a proprietary or sales interest or use of discretion);
  • Whether the investment adviser or a related person maintains custody of an investment advisory client’s assets; and
  • Whether the investment adviser or an affiliate has been convicted of a felony or investment-related misdemeanor, or is subject to an adverse regulatory finding, censure or fine, or a court judgment related to violation of an investment-related statute or regulation.

Is there additional information required by Part 1A?

Yes. Part 1A also requires advisers to complete the following schedules (as applicable):

  • Schedule A –  Requires a list all of the executive officers (e.g., Chief Compliance Officer, Chief Executive Officer, Chief Operations Officer, Chief Financial Officer) and direct owners of the registered investment adviser with a 5% or more ownership interest.
  • Schedule B – Requires a list of all of the indirect owners with a 25% or more ownership interest of a direct owner reported on Schedule A.
  • Schedule D –  Requires information that expands upon answers in Part 1A.
  • Disclosure Reporting Pages – Requires details about felony or investment-related misdemeanor, regulatory discipline, or court judgments related to violation of investment-related statutes and regulations by the investment adviser or its affiliated persons.

What type of information is an investment adviser required to disclose in Part 1B?

Part 1B requires that an adviser registered or applying for registration with any state securities authority provide the following information:

  • Those states where the investment adviser is applying for registration;
  • The supervisory and compliance principal;
  • Information about custody practices and direct fee deduction;
  • Information about the surety bond (if required by the investment adviser’s home state);
  • Information about unsatisfied judgment and liens, investment-related arbitrations and civil judicial action; and
  • Other miscellaneous information.

What type of information is an investment adviser required to disclose in Part 2A?

Part 2A of Form ADV or “firm brochure” is a narrative brochure written in plain English that describes the types of services offered by an investment adviser, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key personnel of the investment adviser. The brochure is the primary disclosure document that investment advisers provide to their clients. When filed, brochures are available to the public on the IAPD website.

What type of information is an investment adviser required to disclose in Part 2B?

Part 2B of Form ADV or “brochure supplement” provides information about the advisory personnel on whom the particular client receiving the brochure relies for investment advice. Among other things, a brochure supplement contains information about the educational background, business experience and disciplinary history (if any) of the supervised persons who provide advisory services to the client. The brochure supplement includes information that would not necessary be included in the firm brochure about supervised persons of the adviser who actually provide the investment advice and interact with clients.

 

Important Information

The information contained in this Frequently Asked Questions is only a summary and is not intended to be a comprehensive analysis of the rules and regulations applicable to registered investment advisers. It is not intended to constitute legal or compliance consulting advice or apply to any one investment adviser’s particular situation. For more information, please see our Terms of Use.

line