Form CRS/Form ADV Part 3 Filing and Delivery

June 05, 2020

On June 5, 2019 the U.S. Securities and Exchange Commission (“SEC”) approved a new rule requiring investment adviser firms to provide retail investment clients with a Consumer Relationship Summary, also known as the Form CRS or Form ADV Part 3. An SEC registered investment adviser’s initial Form CRS/Form ADV Part 3 must be filed via IARD by June 30, 2020. The ADV Part 3 filing and delivery deadline is July 30, 2020. With this fast approaching deadline, investment advisers must act now to ensure the Form ADV Part 3 is timely filed and delivered.

State registered investment advisers that are registered with the Oklahoma Department of Securities are also now required to prepare and file the Form ADV Part 3; please click here to read more about Oklahoma’s specific requirements. (Regulatory Update:  On June 19, 2020, the Oklahoma Department of Securities withdrew (effective immediately) its notice requiring investment adviser firms registered with Oklahoma to file the Form ADV Part 3/Form CRS.)

Filing the Form CRS/Form ADV Part 3

Once an SEC registered investment adviser firm has finalized its initial Form CRS/ADV Part 3, it must file the brochure via IARD and ensure it is delivered to existing clients.

Filing must occur by June 30, 2020. However, investment advisers should make the filing as soon as possible to avoid last minute delays due to technical issues or other unexpected difficulties. Investment advisers with questions about their IARD entitlement or other IARD questions can click here to view FINRA’s IARD Call Center contact information.

Delivering the Form CRS/Form ADV Part 3

Existing clients of an SEC registered investment adviser who are retail investors must receive the initial Form ADV Part 3 no later than July 30, 2020. In addition, existing clients who are retail investors must receive initial delivery of the Form ADV Part 3 before or at time of any of the following events: opening a new account, rollover of assets to IRA, or recommending new investment advisory service or an investment not to be held in existing account.

Retail investors who become a new client after June 30, 2020 must receive the Form ADV Part 3 before or at the time the investment adviser enters into an investment advisory contract with the retail investor.

After initial delivery, any changes to the Form ADV Part 3 must be communicated to the investment adviser’s existing retail investor clients within 60 days after the updates are required to be made. The communication should include an exhibit highlighting the most recent changes, along with the newly updated Form ADV Part 3.

Delivery Format

If delivered in a paper mailing with other documents, the Form CRS/ Form ADV Part 3 must be placed at the front of the mailing so it is the first document the client sees. In addition, the Form CRS/Form ADV Part 3 should be posted on the investment adviser’s public website in a location and format that is easily accessible to retail investors.

Electronic delivery of the Form CRS/Form ADV Part 3 is permissible if the client has consented to receive electronic communications from the investment adviser. When delivered in electronic format, the investment adviser firm should use hyperlinks to provide clients a way to easily access any referenced materials, such as the Form ADV Part 2A. If delivered in paper format, the investment adviser firm should include URL address, QR codes, or other means to access any referenced information.

Recordkeeping

Although not explicitly required by the rule, the investment adviser should maintain a record of delivery to each retail investor client of the firm, including date and method of delivery. These records will help the investment adviser prove compliance with the delivery requirements of the rule when examined by the SEC or state securities regulator, as applicable.

When Delivery Is Not Required

An SEC registered investment adviser is not required to deliver the Form ADV Part 3 to its clients that are entities that service retail investors (such as other investment adviser firms) or that contain retail investors (e.g., pooled investment vehicles) so long as the entity itself does not meet the definition of retail investor. Furthermore, a request by a client to add a new account owner, without any further changes or additions to the account agreement, does not require delivery of the Form ADV Part 3.

Other Resources

For help determining whether your investment adviser firm is required to deliver a Form ADV Part 3/Form CRS or for more information on the Form ADV Part 3/Client Relationship Summary, you can review the SEC’s Form ADV Part 3 instructions here or visit our Form ADV Part 3 FAQs website page here. Click here to read OCIE’s Risk Alert for Form CRS Compliance. You can also watch RCC’s recent complimentary compliance training webinar detailing the Form ADV Part 3/Form CRS by clicking here. The complimentary webinar slides are available here.

To read our three part blog on Drafting Tips for the Form CRS/Form ADV Part 3, click here for Part 1 – “Preparing to Draft Your Form ADV Part 3”. To read Part 2 – “Drafting the Content of Your Form ADV Part 3”, click here. To read Part 3 – “Style and Technical Considerations”, click here.

To help investment adviser firms meet the requirements of the Form ADV Part 3, RIA Compliance Consultants has prepared a compliance manual update section for the ADV Part 3. Click here to purchase this update section. We can also assist your investment adviser firm in preparing the Form ADV Part 3. Our fee for this service is $795. Click here to purchase this service. To purchase our Form ADV Part 3 Drafting Service and compliance manual update section through our ADV Part 3 Comprehensive Package click here.

Contact Us

If your investment adviser firm is an existing client of RIA Compliance Consultants and would like assistance developing customized policies and procedures and/or IAR training regarding filing and delivery of the Form CRS/Form ADV Part 3, we encourage you to speak with your compliance consultant. Or, if you are not an existing client of RIA Compliance Consultants, click here to set up an introductory call with our Business Development Team.

Posted by Grant Parr
Labels: ADV Part 3