Annual ADV Updating Amendment for IA Firms

Under SEC and state regulations, a registered investment advisory firm must file its annual amendment to Form ADV within 90 days of the end of its fiscal year.  For most firms this means that the Annual Updating Amendment is due by March 31.  In addition to the traditional updates which firms need to make on Form ADV, advisers will also need to be aware of the new regulations with respect to ADV Part 2 which may require the adviser to complete a new form ADV part 2 during the updating process.  We are making special note of the updating requirement earlier than usual because of the new ADV 2 requirement.

Overview of Major Items on ADV to Update

When a firm completes an annual update to Form ADV, the firm should go through each question and make sure disclosures are accurate and up to date.  In general the firm’s chief compliance officer will complete the update or work with an outside investment adviser compliance firm or law firm to complete the update.

Some of the key items of Form ADV which need to be updated include:

  • Employees (Items 5.A. and 5.B.)
  • Number of clients (Items 5.C. and 5.H.)
  • Number of accounts (Item 5.F.)
  • Assets under management (Item 5.G.)
  • Other material changes can also be disclosed on the Annual Updating Amendment, such as changes to reportable disciplinary and financial disclosures, contact information, custody, and ownership.   [Note: these items need to be updated on Form ADV within 30 days of when they take place.]

While Part 1 of Form ADV can be completed using the online form on the IARD system, the new ADV Part 2 must be filed electronically as a text-searchable PDF.  You will not be able to

submit a PDF file of a scanned copy Part 2 on the IARD system.

New Regulations Regarding ADV Part 2

IA firms applying for SEC registration as of January 1, 2011 and existing firms filing Annual Updating Amendments are now required to use the new Part 2A, the “firm brochure.”  In addition, the SEC has established the following compliance dates regarding Part 2B, the “brochure supplement:”

SEC Compliance Dates for Delivery of Brochure Supplements to Clients

SEC Compliance Dates Extensions*
New/Prospective Clients Existing Clients New/Prospective Clients Existing Clients
New IA registrants Applying as of 01/01/11, deliver upon registering Applying between 01/01/11 and 04/30/11, begin delivering by 05/01/11

Applying after 04/30/11, deliver upon registering

Applying between 01/01/11 and 04/30/11, deliver by 07/01/11.
Existing IAs Upon filing Annual Updating Amendment Within 60 days of filing Annual Updating Amendment Registered as of 12/31/10 with fiscal year ending 12/31/10 through 04/30/11, begin delivering by 07/31/11

Registered as of 12/31/10 with fiscal year ending after 04/30/11, deliver upon filing Annual Updating Amendment

Registered as of 12/31/10 with fiscal year ending 12/31/10 through 04/30/11, deliver by 09/30/11

Registered as of 12/31/10 with fiscal year ending after 04/30/11, deliver within 60 days of filing Annual Updating Amendment

*On December 28, 2010, the SEC extended the compliance dates by four months to provide certain IAs more time to deliver the brochure supplement.

Incorporating the New ADV Part 2 for State Registrations

Because not all states have adopted the new ADV Part 2, state-registered IAs should check their state rules to confirm whether they need to use the new form or if they can continue to use the old form.  In many states, the next amendment to Form ADV must include the new ADV Part 2, even if it is not the Annual Updating Amendment.  For example, as of January 1, 2011, states including Alaska, California, Connecticut, Indiana, Maine, Maryland, Massachusetts, Ohio, Oregon, and Tennessee are requiring that registered IAs use the new ADV Part 2 as part of any amendment, as well as the required Annual Updating Amendment.

For more information on ADV Part 2, especially with respect to state adoptions, please see our update on new ADV Part 2.

For information on expected costs to prepare the new Form ADV 2, please see this post.

****

Bart Mallon provides investment adviser registration and compliance services through Cole-Frieman & Mallon LLP.  He can be reached directly at 415-868-5345.

Leave a Reply