SEC Form ADV Overview

80-20 Rule

What is SEC Form ADV?

The ADV form is a submission required to the Securities and Exchange Commission (SEC), by a professional investment advisor, which specifies the investment style, assets under management (AUM) and key management personnel of a consulting firm. The ADV form must be updated annually and made available to the public for businesses managing more than $ 25 million.

If disciplinary action has been taken against the counselor in the past, this should be noted in the first section of an ADV form. The second section deals with the assets under management, the investment strategy, pricing methods and the company’s service offerings.

Key points to remember

  • The SEC requires that the ADV form be submitted by a professional investment advisor.
  • The ADV form serves as a registration document which must be submitted to the SEC and the national securities regulatory authorities.
  • Prospective and current clients of an investment advisor should always consult the ADV form on file, as it provides transparent evidence of the asset mix within the business, as well as the professional histories of key personnel.

Who can file the SEC ADV form?

Formally called the Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Adviser form, Form ADV serves as a registration document that must be submitted to the SEC and state securities regulatory authorities. The North American Securities Administrators Association (NASAA) reviews and approves changes to the document, and it is supported by the Financial Industry Regulatory Authority (FINRA).

Most advisors will offer an up-to-date ADV form to any potential client early in the marketing process; in fact, investors should be immediately cautious with an advisor who does not freely offer the form on request.

Prospective and current clients of an investment advisor should always consult the ADV form on file, as it provides transparent evidence of the asset mix within the business, as well as the professional histories of key personnel.

How to file the ADV form

The first part of the ADV form is organized as a form to fill out (often easier for the advisor to compile) and includes details of the advisor’s activities, ownership structure and breakdown, as well as affiliations; all relevant business practices; current and sometimes historical customers; and details of its key and other employees. Finally, it will always include any disciplinary event involving the consulting firm and / or its employees. The SEC reviews the information in this part of the form to process registrations and manages its regulatory and examination programs.

Section Two of the ADV is a longer description, prepared by the Investment Advisor. This must be written in plain English and contain detailed information on the specific types of advisory services offered, the advisor’s fee schedule, disciplinary information (as in Part 1), any conflict of interest (for example, if directors of the firm have outside business interests that could influence their judgments or provide inside information). Part 2 should also include a management background – their educational history and business experience. These biographies should also apply to key advisory staff. Section 2 is the most important primary information document that investment counselors offer to their clients. The brochures are always accessible to the public once deposited.

The ADV Part 2 form must also include a supplement, which details information on key employees who provide investment advice directly to clients.

ADV form annual updates

All investment advisers are required to submit annual updates to their brochures (for example, any significant changes in the business and critical to their business).

Access to the ADV form

To request a copy of the ADV form, contact the SEC branch nearest you. Prospective and current clients of an investment advisor should always consult the ADV form on file as it provides transparent evidence of the asset mix within the business and the professional histories of key personnel.

Download SEC Form ADV

Here is a link to a downloadable ADV form.

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