Form ADV Part 3 FAQs

The Form CRS/Form ADV Part 3 relationship summary is a written disclosure that provides a retail investor with succinct information about the relationships and services the firm offers to retail investors, fees and costs that retail investors will pay, specified conflicts of interest and standards of conduct, and disciplinary history, among other things. 

See page 6 of https://www.sec.gov/rules/final/2019/34-86032.pdf .

The requirements of the Form CRS/Form ADV, Part 3 apply to all investment advisers registered or applying for registration with the U.S. Securities and Exchange Commission (“SEC”).

See page 3 at https://www.sec.gov/rules/final/2019/34-86032-appendix-a.pdf .

An investment adviser firm must initially deliver a Form CRS/Form ADV Part 3 to each retail investor before or at the time the investment adviser firm enters into an investment advisory contract with the retail investor.  “Retail investor” is defined as “a natural person, or the legal representative of such natural person, who seeks to receive or receives services primarily for personal, family or household purposes.”  The types of pooled investment vehicles would not meet this definition and a relationship summary would not be required to be delivered.  See https://www.sec.gov/investment/form-crs-faq .

The requirements of the Form CRS/Form ADV, Part 3 do not apply to exempt reporting advisers filing with the SEC. 

See page 3 at https://www.sec.gov/rules/final/2019/34-86032-appendix-a.pdf .

The SEC’s new rule, which adopts the Form CRS/Form ADV, Part 3 requirement, applies only to SEC registered investment adviser firms and not state registered investment adviser firms (except for investment adviser firms registered with the Oklahoma Department of Securities).  However, a state securities regulator could adopt a similar requirement for investment adviser firms registered at the state level.  A state registered investment adviser should monitor the regulatory notices from its state securities regulators on whether the particular state intends to adopt a similar Form CRS/Form ADV, Part 3 relationship summary requirement for retail investors in that state.

Regulatory Update:  On June 10, 2020 the State of Rhode Island’s Securities Division announced that investment adviser firms registered with the State of Rhode Island must file the Form ADV Part 3/Form CRS relationship summary before June 30, 2020. For additional details, please click here.

Regulatory Update:  On June 19, 2020, the Oklahoma Department of Securities withdrew (effective immediately) its notice requiring state registered investment adviser firms to file the Form ADV Part 3/Form CRS.  For additional details, please click here.  As a result, the following requirements described below are no longer in effect.

Regulatory Update:  On June 19, 2020, the Oklahoma Department of Securities withdrew (effective immediately) its notice requiring state registered investment adviser firms to file the Form ADV Part 3/Form CRS.  For additional details, please click here.  As a result, the following requirements described below are no longer in effect. 

State registered investment adviser firms in Oklahoma should meet the same initial filing requirements for the Form CRS/Form ADV Part 3 as an SEC registered investment adviser, which is June 30, 2020.  See https://www.securities.ok.gov/Firms-profs/InvestmentAdviser/Form-CRS/

Regulatory Update:  On June 19, 2020, the Oklahoma Department of Securities withdrew (effective immediately) its notice requiring state registered investment adviser firms to file the Form ADV Part 3/Form CRS.  For additional details, please click here.  As a result, the following requirements described below are no longer in effect. 

No, the Oklahoma Department of Securities explains that although the Oklahoma rules do require delivery of the Form CRS/Form ADV Part 3 to investment advisory clients, the Oklahoma Department of Securities considers it a best practice to deliver the Form CRS/Form ADV Part 3 to investment advisory clients within 30 days of filing via the IARD system.  See https://www.securities.ok.gov/Firms-profs/InvestmentAdviser/Form-CRS/

A SEC registered investment adviser firm will be required to deliver the Form CRS/Form ADV, Part 3 relationship summary to each “retail investor” of the investment adviser firm.

For purposes of an SEC registered investment adviser’s delivery of the Form CRS/Form ADV Part 3 relationship summary, a “retail investor” is a natural person, or the legal representative of such natural person, who seeks to receive or receives services primarily for personal, family or household purposes.

See page 10 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Yes, an investment adviser firm registered with the SEC must prepare and deliver the Form CRS/Form ADV Part 3 to a retail investor even if he or she has a high net worth.  The SEC explained in the release to Form CRS Relationship Summary; Amendments to Form ADV that “…the final retail investor definition will capture natural persons without any distinction based on net worth…  We continue to believe that the retail investor definition should not distinguish based on a net worth or other asset threshold test and that all individual investors would benefit from clear and succinct disclosure regarding key aspects of available brokerage and advisory relationships.”   See https://www.sec.gov/rules/final/2019/34-86032.pdf at pages 193 – 194.

Whether a SEC registered investment adviser firm must provide the Form CRS/Form ADV Part 3 depends upon whether the trustee is a “non-professional legal representative”.  The SEC explained in the final release associated with the amendment that “… a “legal representative” of a natural person [is meant] to cover only non-professional legal representatives (e.g., a non-professional trustee that represents the assets of a natural person and similar representatives such as executors, conservators, and persons holding a power of attorney for a natural person).  In referring to non-professional legal representatives, we intend to capture persons who are acting on behalf of natural persons and are not regulated financial services professionals retained by natural persons to exercise independent professional judgment.  This responds to those commenters who argued that it should not be necessary to provide a relationship summary to regulated professionals in the financial services industry, such as registered investment advisers and broker-dealers, corporate fiduciaries (e.g., banks, trust companies and similar financial institutions) and insurance companies, and the employees or other representatives of such advisers, broker-dealers, corporate fiduciaries and insurance companies.” See https://www.sec.gov/rules/final/2019/34-86032.pdf at page 195.  As a result, a regulated bank or trust company in the U.S. serving as a trustee would not meet the definition of a “non-professional legal representative” and consequently the SEC registered investment adviser firm would not be required to prepare and deliver the Form CRS/Form Adv Part 3 to the trustee from the bank/trust company.

A retirement plan and the retirement plan representative are not considered a “retail investor” for purposes of the Form CRS/Form ADV Part 3.  The SEC explained that “…the final definition of retail investor does not include most workplace retirement plans or their plan representatives seeking services for a plan established, maintained and operated by an employer to provide pension or retirement savings benefits to employees, because such plans and their representatives are not seeking services primarily for personal, family or household purposes.”  See page 200 -201 at https://www.sec.gov/rules/final/2019/34-86032.pdf .  However, the SEC noted “[i]f a plan representative who decides the services arrangements for a workplace retirement plan is a sole proprietor or other self-employed individual who will participate in the plan, the plan representative also would be a retail investor seeking services for personal, family or household purposes and must receive a copy of the firm’s relationship summary.”  See page 201 at https://www.sec.gov/rules/final/2019/34-86032.pdf .

No, a SEC registered investment adviser firm is not required to prepare or file a Form CRS/Form ADV, Part 3 relationship summary if it does not have any retail clients.

See page 2 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

For a SEC registered investment adviser firm (which is not dually registered as a broker/dealer), the Form CRS/Form ADV, Part 3 may not exceed 2 pages.  If an investment adviser firm is a dually registered as a broker-dealer and desires to use 1 relationship summary, the relationship summary many not exceed 4 pages. The SEC registered investment adviser firm must use reasonable paper size, font size and margins. 

See page 2 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Similar to the Form ADV, Part 2A, the Form CRS/Form ADV, Part 3 relationship summary must include the specific information asked in the instructions.  The investment adviser  firm must respond to each item and must provide responses in the same order as the items appear in these instructions. The investment adviser firm may not include disclosure in the relationship summary other than disclosure that is required or permitted by the instructions and the applicable item.

See page 2 of https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

The Form CRS/Form ADV, Part 3 relationship summary should be easy to read and written in plain English.  The SEC explained that the Form CRS/Form ADV, Part 3 relationship summary should (i) use short sentences and paragraphs, (ii) use definite, concrete, everyday words, (iii) use active voice, (iv) avoid legal jargon or highly technical business terms unless you clearly explain such terms, and (v) avoid multiple negatives. The investment adviser firm must write your response to each item as if the investment adviser firm is speaking to the retail investor, using “you,” “us,” “our firm,” etc. 

See page 3 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

No, a SEC registered investment adviser firm’s answers in the Form CRS/Form ADV, Part 3 relationship summary must be factual and provide balanced descriptions to help retail investors evaluate your services. For example, you may not include exaggerated or unsubstantiated claims, vague and imprecise “boilerplate” explanations, or disproportionate emphasis on possible investments or activities that are not offered to retail investors.  All information in a SEC registered investment adviser firm’s Form CRS/Form ADV, Part 3 relationship summary must be true and may not omit any material fact.

See page at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

No, the Form CRS/Form ADV, Part 3 relationship summary does not replace or serve as substitute for any other reporting or disclosure obligations of a SEC registered investment adviser firm under the Investment Advisers Act of 1940 as amended or the SEC rules thereunder.

See page 3 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Due to the length limitations of the Form CRS/Form ADV, Part 3 relationship summary, an investment adviser firm’s answer in the relationship summary will need to reference the more detailed disclosures in the Form ADV Part 2A.  In electronic version of the Form CRS/Form ADV, Part 3 relationship summary which are posted on the investment adviser firm’s website or delivered electronically, the investment adviser firm must provide a way to access the referenced materials such as a hyperlink.  In the paper version of the Form CRS/Form ADV, Part 3 relationship summary, the investment adviser firm must include URL address or QR code or other means to access the information.

See page 4 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Yes, the SEC is encouraging dually registered broker-dealer/investment adviser firms to use a single Form CRS relationship summary.  However, a dual registrant is permitted to prepare two separate Form CRS relationship summaries for brokerage services and investment advisory services.  Whether a dually registered broker-dealer/investment adviser firm prepare a single relationship summary or two, the dually registered broker-dealer/investment adviser firm must present the brokerage and investment advisory information with equal prominence and in a manner that clearly distinguishes and facilitates comparison of the two types of services.  If a dually registered investment adviser/broker-dealer prepares two separate relationship summaries, the dually registered investment adviser/broker-dealer must reference and provide a means of facilitating access to the other relationship summary and deliver to each retail investor both relationship summaries with equal prominence and at the same time, without regard to whether the particular retail investor qualifies for those retail services or accounts.

See page 5 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

A SEC registered investment adviser firm, which is required by the SEC to deliver a Form CRS/Form ADV, Part 3 relationship summary to retail investors, must file electronically the Form CRS/Form ADV Part 3 relationship summary with the SEC through the Investment Adviser Registration Depository (“IARD”).  The investment adviser firm must file via the IARD a Form CRS/Form ADV, Part 3 relationship summary which is a text searchable format with machine-readable headings.

See page 6 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

If an investment adviser firm is already registered with the SEC or has an application pending to register with the SEC before June 30, 2020, an investment adviser firm may file with the SEC the Form CRS/Form ADV, Part 3 relationship summary starting May 1, 2020 and must have filed with the SEC the Form CRS/Form ADV, Part 3 relationship summary by June 30, 2020.

See page 7 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Within 30 days after the date by which the SEC registered investment adviser firm is first required to electronically file Form CRS/Form ADV, Part 3 relationship summary with the SEC, the investment adviser firm must deliver its Form CRS/Form ADV, Part 3 relationship summary to each of its existing clients and customers who are retail investors.  In other words, a SEC registered firm is required to electronically file the Form CRS/Form ADV, Part 3 relationship summary by June 30, 2020 so all existing (before June 30, 2020) clients (meeting the definition of “retail investors”) should receive the Form CRS/Form ADV, Part 3 by no later than July 30, 2020.

See page 8 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf and https://www.sec.gov/investment/form-crs-faq .

A SEC registered investment adviser firm must deliver a Form CRS/Form ADV, Part 3 relationship summary to each retail investor before or at the time the investment adviser firm enters into an investment advisory contract with the retail investor.  A SEC registered investment adviser firm must deliver the Form CRS/Form ADV, Part 3 relationship summary even if the investment adviser firm’s agreement with the retail investor is oral.

See page 6 – 7 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

An investment adviser firm must deliver the most recent Form CRS/Form ADV, Part 3 relationship summary to an existing retail investor before or at time when (i) a new account is opened that is different than the retail investor’s existing account, (ii) the investment adviser firm recommends that the retail investor roll over assets from a retirement account into a new or existing account or investment, or (iii) investment adviser firm recommend new investment advisory service.

Yes, an investment adviser firm can electronically deliver the Form CRS/Form ADV Part 3 to retail investors as long as consistent with Use of Electronic Media by Broker-Dealers, Transfer Agents, and Investment Advisers for Delivery of Information.  See www.sec.gov/rules/concept/33-7288.txt .  However, the Form CRS/Form ADV 3 must be presented in a prominent manner within the electronic medium and be easily accessible.

Yes, an investment adviser firm may deliver the Form CRS/Form ADV Part 3 separately, in a bulk delivery to clients, or as part of the delivery of information that the firm already provides, such as the annual Form ADV update, account statements or other periodic reports.  See https://www.sec.gov/investment/form-crs-faq .

If the Form CRS/Form ADV Part 3 is delivered in paper format as part of a package of documents, an investment adviser firm must ensure that the Form CRS/Form ADV 3 is the first among any documents that are delivered at that time. If the Form CRS/Form ADV Part 3 is delivered electronically by an investment adviser firm, it must be presented prominently in the electronic medium, for example, as a direct link or in the body of an email or message and must be easily accessible for retail investors.  See https://www.sec.gov/investment/form-crs-faq . 

If an investment adviser firm is registered with the SEC, the investment adviser firm must amend its Part 3 of the investment adviser firm’s Form ADV within 30 days whenever any information in the investment adviser firm’s relationship summary becomes materially inaccurate by filing with the SEC an additional other-than-annual amendment or by including the relationship summary as part of an annual updating amendment.

See page 4 at https://www.sec.gov/rules/final/2019/34-86032-appendix-a.pdf .

A SEC registered investment adviser must communicate any changes in the updated Form CRS/For ADV, Part 3 relationship summary to retail investors who are existing clients within 60 days after the updates are required to be made and without charge.

If an SEC registered investment adviser firm has 30 days to file the updated Form CRS/Form ADV, Part 3 relationship summary with the SEC and then 60 days after the 30 days to file, the investment adviser firm essentially has 90 days to deliver the updated Form CRS/Form ADV, Part 3 relationship summary to the retail investors who are existing clients from date that the Form CRS/Form ADV, Part 3 relationship summary became inaccurate or out dated.

See page 8 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Yes, a Form ADV Part 3 must be delivered to existing investment advisory clients, who may have already received an ADV Part 3 whenever the client (1) opens any new accounts with you, (2)  whenever you recommend they rollover assets from a retirement account to a new or existing account/investment, (3) or whenever you recommend or provide a new advisory service or investment that doesn’t involve opening a new account/wouldn’t be held in an existing account.

See page 8 https://www.sec.gov/rules/final/2019/34-86032-appendix-a.pdf .

An investment adviser firm registered with the SEC must include an exhibit highlighting the most recent changes required by Form CRS, Form ADV, Part 3 when delivering the updated Form CRS/Form ADV, Part 3 relationship summary to an existing retail investor.

See page https://www.sec.gov/rules/final/2019/34-86032-appendix-a.pdf .

No, an investment adviser firm may, but is not required, to submit amended versions of the Form ADV Part 3/Form CRS relationship summary as part of your annual updating amendment.  An SEC registered investment adviser must amend Form ADV Part 3/Form CRS relationship summary within 30 days whenever any information in your relationship summary becomes materially inaccurate by filing with the SEC an additional other-than-annual amendment or by including the relationship summary as part of an annual updating amendment.

Yes, a SEC registered investment adviser firm must post the current version of the Form CRS/Form ADV, Part 3 relationship summary prominently on the investment adviser firm’s public website, if it has one, in a location and format that is easily accessible for retail investors.

See page 9 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf .

Like the Form ADV, Part 2A disclosure brochure, a SEC registered investment adviser firm is required to maintain the Form CRS/Form ADV, Part 3 relationship summary for 5 years following the end of the fiscal year during which the last entry was made on such record.

See page 6 at https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf.

Generally, a standalone investment adviser (not dually registered as a broker-dealer) must include in its Form ADV Part 3 a list of all the advisory services it offers, the type of trading authority it maintains over client accounts, a descriptions of their fees,  a list of their conflicts of interest, a statement of the standard of conduct expected of an investment adviser, any reportable disciplinary events, a set of prescribed questions clients should ask the investment adviser, and references to additional information.

See https://www.sec.gov/rules/final/2019/34-86032-appendix-b.pdf

No. An investment adviser firm may not include disclosures in the Form CRS/Form ADV, Part 3 relationship summary other than the disclosures required or permitted by the Instructions.

Under Items 2, 3, 4 and 5 of the Form CRS/Form ADV Part 3, the investment adviser firm is required to include “Conversation Starters” which are questions for retail investors to ask the investment adviser representative.  An investment adviser firm must use text features (e.g., larger or different font, a text box, bolded, italicized or underlined text or lines) to offset the Conversation Starters from other sections.

The Form CRS/Form ADV, Part 3 relationship summary will not include answers to the Conversation Starters.  However, an investment adviser firm should train its investment adviser representative on how to answer the Conversation Starters.  With respect to investment adviser firms which provided automated or robo-advisory services without a particular investment adviser representative who can answer each of the questions for the retail investor, the investment adviser firm must include a website page answering each of the questions and must reference such web page in the Form CRS/Form ADV, Part 3.

No. An investment adviser firm may only prepare one Form CRS/Form ADV, Part 3 summarizing all of the principal relationships and investment advisory services it offers to retail investors. For example, if an investment adviser firm offers a wrap fee program, advice to participants in a 401(k) plan and discretionary asset management for high net worth clients, the investment adviser firm would be required to prepare a single Form CRS/Form ADV Part 3 relationship summary describing all of the investment adviser firm’s different services. To the extent a dually registered investment adviser/broker-dealer firm prepares a single Form CRS/Form ADV Part 3 relationship summary addressing both brokerage and investment advisory services (rather than two separate relationship summaries), the dually registered firm must summarize all of the principal brokerage and investment advisory relationships and services the firm offers to retail investors.  See https://www.sec.gov/investment/form-crs-faq .

No, the U.S. Securities and Exchange Commission (“SEC”) is not extending for investment advisers the June 30, 2020 deadline for filing the Form ADV Part 3/Client Relationship Summary (“CRS”) or the July 30, 2020 deadline for delivering the Form ADV Part 3/CRS to existing investment advisory clients due to COVID-19.  On April 2, 2020, Jay Clayton, the Chairman of the SEC stated that investment adviser “firms should continue to make good faith efforts around operational matters to ensure compliance by June 30, 2020, including devoting resources as necessary and available in light of the circumstances.  To the extent that a[n investment adviser] firm is unable to make certain filings or meet other requirements because of disruptions caused by COVID-19, including as a result of efforts to comply with national, state or local health and safety directives and guidance, the [investment adviser] firm should engage with us.  I expect that the Commission and the staff will take the firm-specific effects of such unforeseen circumstances (and related operational constraints and resource needs) into account in our examination and enforcement efforts.”  For additional details, see https://www.sec.gov/news/public-statement/statement-clayton-investors-rbi-form-crs .