SEC Commissioner indicates SEC to Re-Consider New Form ADV Part 2 for Investment Advisers

May 04, 2010

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In a speech at the Investment Adviser Association Annual Conference on April 29, 2010 (click here to read the entire speech), Luis Aguilar, Commissioner at the United States Securities and Exchange Commission (SEC), stated the SEC is expected to soon revisit proposed changes to Form ADV Part II.   According to Commissioner Aguilar, “the need to update Part II has been clear for over a decade.”  In April 2000, the SEC originally proposed comprehensive amendments to Part I and II of Form ADV.  However, at that time only changes to Part I were passed and the proposed changes to Part II were allowed to lapse without implementation.  Then, in March of 2008, the SEC re-proposed various amendments to Part II.

In its March 2008 release, the SEC proposed exhaustive changes to Form ADV Part II including the use of a table of contents, the use of a plain-English brochure, the specific requirement to disclose all material arrangements and potential/real conflicts of interest.  Investment adviser firms would also be required to deliver a complete copy of the brochure to all clients at least annually. Currently, investment adviser firms are required to only offer Form ADV Part II.  The proposal also requires a supplement intended to provide information about the qualifications and background of personnel be providing the investor with personalized investment advice.  The proposed rule overhauls the Schedule H brochure as well.  A Schedule H must be prepared by wrap-fee program sponsors.

Form ADV is used as the official application document to register as an investment adviser firm. Both the SEC and the state securities regulators require use of the Form ADV as an investment advisor registration document. Once investment advisor registration is granted, the Form ADV must be amended at least annually and whenever material changes occur. More importantly, the Form ADV Part II and Schedule F serve as the required disclosure statement that an investment adviser must provide to its clients. Investment advisers that use a disclosure statement other than the Form ADV Part II and Schedule F must ensure that the disclosure statement contains the same information as the Form ADV Part II and Schedule F.

Stay tuned to RIA Compliance Consultants as we continue to follow this story.

Posted by Bryan Hill
Labels: ADV Part 2, SEC