During the keynote address at the Compliance and Legal Society of the Securities Industry and Financial Markets Association 2010 Annual Seminar on May 6, 2010 (click here to read the entire speech), Mary Shapiro, the Chairman of the U.S. Securities and Exchange Commission (“SEC”), stated that her staff is preparing to present to the full Commission a proposal regarding adoption of Form ADV Part 2.
Although a registered investment adviser is held to a fiduciary standard, and consequently has an obligation to disclose or avoid conflicts of interest and to advise a client in a manner that is in the client’s best interest, a broker-dealer is subject to a different regulatory regime and does not have to meet the same fiduciary standard as an investment adviser. Chairman Shapiro commented that she believes that broker-dealers and investment advisers who provide the same services should “meet the same high fiduciary standard” and indicated that she hopes that any regulatory reform will address this issue.
Under SEC regulations, the Form ADV Part II, along with Schedule F, serves as the required disclosure statements that must be given to a client initially and only offered annually thereafter. Chairman Shapiro described the current Form ADV Part II as a “1960s check-the-box, paper-based approach,” where as, the proposed amendments would require more of a “plain English narrative discussion of an adviser’s conflicts, compensation, business activities, and disciplinary history.” Finally, the proposed amendment would require this same information to be provided through the SEC’s website, so that investors, as well as the general public, would have access to this information.