Expert Guidance Through A Significant Regulatory Transition

The SEC recently adopted amendments to Part 2 of Form ADV and related rules that require investment advisors to prepare a “Plain-English” narrative brochure and brochure supplement to replace the antiquated Form ADV 2 and supporting schedules (i.e., Schedule F). The revised Form ADV 2 and SEC rules require that all advisors file a narrative brochure(s) electronically in a text searchable PDF format on the Investment Adviser Public Disclosure website (“IARD”) and to deliver the Form ADV 2 Brochure to clients within 120 days of filing.

Advisors must also prepare Brochure Supplements for certain employees. These supplements must be delivered to clients and maintained with the firm’s compliance records.

AdvisorAssist is actively assisting advisors in this transition. Our services include:

• Conversion from legacy Form ADV Part 2 to new “Plain-English” ADV 2
• Advice and drafting of Wrap Fee Brochures
• Advice and drafting of new ADV 2 Brochure Supplements
• Chief Compliance Officer training

Form ADV 2 – New Sections

The new “Plain-English” ADV 2 must be in a consistent format that allows investors to easily compare advisors to one another. Below is the Table of Contents that the SEC and state regulators now require:

• Cover Page with RIA description and relevant dates
• Material Changes
• Table of Contents
• Advisory Business
• Fees and Compensation
• Performance-Based Fees
• Types of Clients
• Methods of Analysis, Investment Strategies and Risk of Loss
• Disciplinary Information
• Other Financial Industry Activities and Affiliations
• Code of Ethics, Participation or Interest in Client Transactions and Personal Trading
• Brokerage Practices
• Review of Accounts
• Client Referrals and Other Compensation
• Custody
• Investment Discretion
• Voting Client Securities
• Financial information
• Brochure Supplement (Part 2B, the “Brochure Supplement” contains advisor biographies)

Form ADV 2 – Frequently Asked Questions

Q: When is the new ADV 2 effective?
A: Effective October 12, 2010, all new RIA Registrants must file their ADV in the new “Plain-English“ format.

Q: When do existing RIAs new to implement the new “Plain-English“ ADV 2?
A: Existing RIAs have ninety (90) days following their fiscal year end to draft and file via the IARD system.

Q: Are there any changes for SEC Advisors?
A: The biggest change for SEC registered RIAs is that the new ADV 2 must be filed on the IARD system and publicly available.

Have additional questions? Give us a call at 866-513-4042.