Get Form ADV right: new requirements and changing deadlines could make filing Form ADV a tricky business.
Unlike the old ADV Part 2 and Schedule F, the new ADV Part 2A does not require a section in which investment advisor representatives of the firm are listed with their education and business backgrounds. Instead, investment advisors shall be required to provide investment advisory clients with a Form ADV Part 2B, or Brochure Supplement, for each representative who provides that particular client with advisory services. The Brochure Supplements must be delivered to the client before or at the time a representative begins to provide advisory services to a client.
A Brochure Supplement shall detail the educational background and business experience of each investment advisor representative, just as the old Form ADV Part 2 and Schedule F previously required. However, unlike the old Form ADV Part 2 and Schedule F, the Brochure Supplement must also detail any legal or disciplinary events material to a client's, or prospective client's, evaluation of the investment advisor representative.
All investment advisors registered with the Securities and Exchange Commission as of Dec. 31, 2010, and who have a fiscal year ending on Dec. 31, 2010 through April 30, 2011, have until July 31 to begin delivering Brochure Supplements to new and prospective clients. By Sept. 30, these advisors must deliver Brochure Supplements to all existing clients. The compliance due dates for delivering Brochure Supplements for existing registered investment advisors with fiscal years ending after April 30, 2011 shall be their ADV Part 2A deadline--120 days after their firm's fiscal year end.
There are also new procedural requirements. Under the new requirements, each year, within 120 days of the investment advisor's fiscal year end, the advisor must deliver or offer to provide an updated Brochure to each client. In addition to this requirement, the investment advisor must also provide the client with a Summary of Material Changes, if applicable. The Summary of Material Changes must identify and discuss each material change made to the Brochure since the investment advisor's last annual updating amendment filing. The Summary of Material Changes is a part of each investment advisor's annual updating amendment and will accompany the entire Form ADV when the investment advisor's annual updating amendment is filed electronically each year.
The SEC has also advised Stark & Stark that the annual offer of your written disclosure statement will not suffice for 2011. Due to the substantive changes each advisor's disclosure statement must undergo as part of the new Part 2A and Part 2B format, all SEC-registered investment advisors must, in lieu of an annual offer, deliver to advisory clients their initial ADV Part 2A, as well as all relevant ADV Part 2Bs. Advisory clients must receive the advisor's Part 2A within 120 days of the investment advisor's fiscal year end (May 31 for those advisors with a Dec. 31 fiscal year end).
Two Important Deadlines to Remember
FIRST: Unless the SEC extends the deadline (as it did with Part 2B), Part 2A must be filed electronically on the Investment Adviser Registration Depository no later than March 31, 2011.
SECOND: ADV annual amendments are due 90 days after the firm's fiscal year end. Therefore, investment advisors with a December fiscal year end are required to file their annual amendments by March 31
Thomas D. Giachetti is chairman of the Securities Practice Group of Stark & Stark, a law firm with offices in Princeton, New York, and Philadelphia that represents investment advisors, financial planners, BDs, CPA firms, registered reps, and investment companies, and a regular contributor to Investment Advisor. He can be reached at email@example.com.
KEEPING CURENT * STAYING COMPLIANT
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|Title Annotation:||THE COMPLIANCE COACH|
|Author:||Giachetti, Thomas D.|
|Date:||Mar 1, 2011|
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