Compliance Solutions for Investment Advisers

FAQs — Wrap Fee Program Brochure

 

Who must deliver a wrap fee program brochure?

If you sponsor a wrap fee program you must give a wrap fee program brochure to each client of the wrap fee program. However, if a wrap fee program that you sponsor has multiple sponsors and another sponsor creates and delivers to your wrap fee program clients a wrap fee program brochure that includes all the information required in your wrap brochure, you do not have to create or deliver a separate wrap fee program brochure. A wrap fee program brochure takes the place of your advisory firm brochure required by Part 2A of Form ADV, but only for clients of wrap fee programs that you sponsor.

When must a wrap fee program brochure be delivered?

You must give a wrap fee program brochure to each client of the wrap fee program before or at the time the client enters into a wrap fee program contract.

What are the annual delivery requirements?

Each year you must (i) deliver, within 120 days of the end of your fiscal year, to each client a free updated wrap fee program brochure that either includes a summary of material changes or is accompanied by a summary of material changes, or (ii) deliver to each client a summary of material changes that includes an offer to provide a copy of the updated wrap fee program brochure and information on how a client may obtain the wrap fee program brochure.

What about the delivery of interim amendments?

You do not have to deliver an interim amendment to clients unless the amendment includes information in response to Item 9 of Part 2A (disciplinary information). An interim amendment can be in the form of a document describing the material facts relating to the amended disciplinary event.

As a fiduciary, you have an ongoing obligation to inform your clients of any material information that could affect the advisory relationship. As a result, between annual updating amendments you must disclose material changes to such information to clients even if those changes do not trigger delivery of an interim amendment.

When must we update our wrap fee program brochure?

You must update your wrap fee program brochure: (i) each year at the time you file your annual updating amendment, and (ii) promptly whenever any information in the wrap fee program brochure becomes materially inaccurate. You are not required to update your wrap fee program brochure between annual amendments solely because your fee schedule has changed. However, if you are updating your wrap fee program brochure for a separate reason in between annual amendments, and your fee schedule listed in response to Item 4.A has become materially inaccurate, you should update that item as part of the interim amendment. All updates to your wrap fee program brochure must be filed through the IARD system and maintained in your files.

Can we deliver our wrap fee program brochure electronically?

Yes. An investment adviser may deliver the wrap fee program brochure electronically provided the client gives informed consent to receiving the information electronically and the client can effectively access the electronically delivered information.

What if we sponsor more than one wrap fee program?

You may prepare a single wrap fee program brochure describing all the wrap fee programs you sponsor, or you may prepare separate wrap fee program brochures that describe one or more of your wrap fee programs. If you prepare separate brochures, each brochure must state that you sponsor other wrap fee programs and must explain how the client can obtain brochures for the other programs.

If we provide portfolio management services under a wrap fee program that we sponsor must we deliver both our wrap fee program brochure and our firm brochure to our wrap fee program clients?

No. Just the wrap fee program brochure. If you or your supervised persons provide portfolio management services under a wrap fee program that you also sponsor, your wrap fee program brochure must describe the investments and investment strategies you (or your supervised persons) will use as portfolio managers.

May we combine our wrap fee program brochure into our firm brochure for clients receiving other investment advisory services?

No. Your wrap fee program brochure must address only the wrap fee programs you sponsor.

Must we also deliver brochure supplements to wrap fee program clients?

Yes. A wrap fee program brochure does not take the place of any supplements required by Part 2B of Form ADV.

 

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.

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