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When must an investment adviser firm deliver a disclosure brochure to clients?

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An investment adviser firm must give a firm brochure to each client before or at the time you enter into an advisory agreement with that client. See SEC Rule 204-3(b) and similar state rules.

Each year an investment adviser must (i) deliver, within 120 days of the end of your fiscal year, to each client a free updated 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 brochure and information on how a client may obtain the brochure. See SEC Rule 204-3(b) and similar state rules.

An investment adviser firm does not have to deliver an interim amendment to clients unless the amendment includes information in response to Item 9 of Form ADV Part 2A (disciplinary information). An interim Form ADV Part 2A amendment can be in the form of a document describing the material facts relating to the amended disciplinary event. See SEC Rule 204-3(b)and similar state rules.

Note: As a fiduciary, an investment adviser firm has an ongoing obligation to inform its clients of any material information that could affect the advisory relationship. As a result, between annual updating amendments, an investment adviser firm must disclose material changes to such information to clients even if those changes do not trigger delivery of an interim amendment. See General Instructions for Part 2 of Form ADV, Instruction 3.

Here is Instruction 3 from the General Instructions for Part 2 of Form ADV.

  1. Disclosure Obligations as a Fiduciary. Under federal and state law, you are a fiduciary and must make full disclosure to your clients of all material facts relating to the advisory relationship. As a fiduciary, you also must seek to avoid conflicts of interest with your clients, and, at a minimum, make full disclosure of all material conflicts of interest between you and your clients that could affect the advisory relationship. This obligation requires that you provide the client with sufficiently specific facts so that the client is able to understand the conflicts of interest you have and the business practices in which you engage, and can give informed consent to such conflicts or practices or reject them. To satisfy this obligation, you therefore may have to disclose to client’s information not specifically required by Part 2 of Form ADV or in more detail than the brochure items might otherwise require. You may disclose this additional information to clients in your brochure or by some other means.

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