What Is SEC Form ADV — a practical guide for advisers and investors
Key takeaways
– SEC Form ADV is the uniform registration and disclosure form for investment advisers. It collects firm identity, business practices, fees, conflicts of interest, assets under management (AUM), and disciplinary history. (SEC; Investopedia)
– Form ADV has multiple parts: Part 1 (firm identification and regulatory information) and Part 2 (the public brochure and employee supplements). Part 3 (the “relationship summary”) was spun off as Form CRS. (SEC)
– Advisers must file Form ADV via the Investment Adviser Registration Depository (IARD) and keep it current (annual updates plus prompt amendments for material changes). Clients and the public can access filed ADV records through the SEC’s Investment Adviser Public Disclosure (IAPD) site. (SEC; NASAA)
– Investors should read an adviser’s Form ADV before hiring them; advisers who refuse to provide it are a red flag. (SEC Investor Bulletin)
What Form ADV is and why it matters
– Purpose: Form ADV is both a registration document for regulators and a disclosure tool for clients. It lets regulators evaluate advisers and provides clients a plain‑English brochure describing services, fees, conflicts, disciplinary history, key personnel, and business practices. (SEC)
– Who uses it: The SEC, state securities regulators, and retail and institutional clients rely on information in Form ADV to assess an adviser’s suitability, conflicts, and background.
Key aspects of Form ADV (what information it contains)
– Firm identity and contact information; business structure and ownership (Part 1).
– AUM, client types (individuals, institutions, pooled investment vehicles), services offered, custody information, and fee schedules (Part 1 & Part 2).
– Disciplinary history, litigation, financial conditions that could impair advisory services (Part 1 & Part 2).
– Detailed narrative disclosures in plain English about business practices, fees, conflicts of interest, and personnel biographies (Part 2A and Part 2B).
– Part 3 became Form CRS — a short relationship summary for retail clients summarizing services, fees, conflicts, and relationships. (SEC)
Eligibility and filing requirements (who files)
– Any person or firm that acts as an investment adviser to clients is required to register either with the SEC or with a state securities regulator and submit Form ADV. Which authority (SEC vs. state) depends on multiple factors including AUM, number and type of clients, and exemptions. Check current SEC/state rules for precise thresholds and exemptions. (SEC; NASAA)
– Exempt reporting advisers (for example, many private fund advisers that qualify for certain exemptions) still must file limited parts of Form ADV as “exempt reporting advisers.” (SEC)
What is in each part — concise breakdown
– Part 1: Structured, check‑box and fill‑in format used by regulators. Includes firm identity, ownership, business activities, disciplinary questions, custody, and AUM. Used for regulatory processing. (SEC)
– Part 2A (“Brochure”): Plain‑English narrative describing services, fees, conflicts, methods of analysis, and general business practices. This is the primary client disclosure. (SEC)
– Part 2B (“Brochure Supplement”): Individual adviser biographies and qualifications for key personnel who give investment advice. (SEC)
– Part 3 / Form CRS (Relationship Summary): A separate short form focused on retail investors that summarizes services, fees, conflicts, and standard of conduct. Firms that serve retail clients must deliver Form CRS to those clients. (SEC)
Filing SEC Form ADV: a practical step‑by‑step guide for advisers
1. Determine registration authority and exemption status
– Confirm whether you must register with the SEC or your state(s), or qualify as an exempt reporting adviser. Consult SEC and state rules or legal counsel. (SEC; NASAA)
2. Set up IARD access
– Register for an IARD account (the electronic filing system used to submit Form ADV). (SEC IARD)
3. Complete Part 1 in IARD
– Enter firm identity, AUM figures, business activities, custody status, disciplinary disclosures, and related entities.
4. Draft Part 2A (Brochure) and Part 2B (Supplements)
– Write clear, plain‑English disclosure documents describing services, fees, conflicts, and advisor biographies. Ensure Part 2A addresses conflicts, fee examples, and custody arrangements.
5. File via IARD
– Submit required sections electronically. Exempt reporting advisers submit limited portions as required.
6. Deliver disclosures to clients and prospective clients
– Provide Part 2A and Part 2B to clients or prospective clients as required by rule (typically before or at the time services begin, with prompt delivery of updates in some cases). Deliver Form CRS to retail clients where applicable. (SEC)
7. Update and amend as needed
– File annual updates and promptly amend the form for material changes (see next section). (SEC)
Maintaining compliance: annual updates and prompt amendments
– Annual updating amendment: Advisers must update Form ADV at least annually (within the timeframe specified by the SEC—generally within 90 days after the adviser’s fiscal year‑end) to refresh AUM, staffing, disclosures, etc. (SEC)
– Prompt amendments: If material changes occur (e.g., new disciplinary events, change in ownership, custody changes, major new conflicts), advisers must amend ADV promptly to keep public disclosures accurate. (SEC)
– Recordkeeping: Maintain copies, delivery records, and written policies supporting the disclosures. Regulators may inspect compliance. (SEC)
Accessing a firm’s Form ADV — practical steps for investors
1. Use the SEC’s Investment Adviser Public Disclosure (IAPD) website (https://www.adviserinfo.sec.gov) to search by adviser name, CRD number, or firm.
2. Download the firm’s Part 2 brochure and any supplements; also review the Part 1 filing for regulatory details.
3. Request the latest Part 2A/2B and Form CRS directly from the firm — advisers are required to provide these to new and existing clients on request.
4. What to look for:
– Disciplinary history or litigation (any “yes” answers in Part 1).
– Fee structures and examples — are fees clear? Is there performance-based compensation or conflicts?
– Custody practices and third‑party custodians.
– Outside business activities by key personnel and related‑party transactions (possible conflicts).
– Whether the adviser is also a broker‑dealer or affiliated with one (could affect duty and conflicts).
5. Red flags:
– Adviser refuses to provide Form ADV or Part 2.
– Vague or evasive answers about conflicts of interest, fees, or custody.
– Unexplained disciplinary or financial problems in Part 1.
Do brokers/dealers file Form ADV?
– Not generally. Broker‑dealers are usually registered with the SEC and FINRA and file Form BD and other broker‑dealer specific filings. A broker‑dealer that also acts as an investment adviser (a “dual registrant”) must comply with adviser registration and Form ADV filing requirements for the advisory business. Always check Part 1 and Part 2 for disclosures about broker relationships or dual status. (FINRA; SEC)
Practical checklist for advisers (before filing)
– Decide SEC vs. state registration; confirm exemptions.
– Complete IARD account and technical setup.
– Prepare and proofread Part 2A in plain English; include fee examples, conflicts, and custody details.
– Prepare Part 2B supplements for all advisory personnel who provide advice.
– Implement process to deliver brochures to clients and to retain delivery records.
– Develop calendar and procedures for annual update and prompt amendments.
– Keep up to date with SEC/NASAA guidance and required forms (e.g., Form CRS).
Practical checklist for investors (before hiring an adviser)
– Obtain and read the firm’s Parts 1 & 2 (or ask for them).
– Check IAPD for disclosures and disciplinary history.
– Ask the adviser plain‑English questions about fees, conflicts of interest, who will manage your account, and custody of assets.
– Confirm custodians and reconcile statements independently of the adviser.
– If information is missing or the adviser is evasive, consider alternative advisers.
Where to download and authoritative sources
– SEC — Form ADV and IARD FAQs and filing instructions: https://www.sec.gov/investment/form-adv-and-iard-frequently-asked-questions
– SEC — Investor Bulletin: Form ADV – Investment Adviser Brochure and Brochure Supplement: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_formadv
– SEC — Investment Adviser Public Disclosure (IAPD) search (to view filed ADVs): https://www.adviserinfo.sec.gov
– NASAA — Investment Adviser resources and guidance: https://www.nasaa.org
– Investopedia — explanatory article (background & summary): https://www.investopedia.com/terms/f/form_adv.asp
The bottom line
Form ADV is the primary registration and disclosure vehicle for investment advisers. It is both a regulator’s tool and a client protection device: advisers must file it accurately, keep it current, and provide accessible, plain‑English disclosures to clients. Investors should make reviewing a firm’s Form ADV part of their due diligence before hiring an adviser; advisers should institute robust procedures to ensure ADV is accurate, timely, and understandable.
If you want, I can:
– Walk you step‑by‑step through completing Part 2A with sample language for common disclosures.
– Search the IAPD and summarize a particular firm’s ADV (provide firm name or CRD number).