A New Part 2: Amendments to Form ADV Bring Significant Changes to Investment Adviser Registration and Disclosure Requirements (Part 1)
Mondaq Business Briefing › United Kingdom Law Articles in English (2010)
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A New Part 2: Amendments to Form ADV Bring Significant Changes to Investment Adviser Registration and Disclosure Requirements (Part 1)
After significant effort and time, the Securities and Exchange Commission ("SEC") finally has adopted amendments to Form ADV and related brochure filing and delivery requirements ("Part 2 Amendments").1 Form ADV Part II, currently a "check-the-box" form supported by a disclosure schedule, will now be replaced with Form ADV Part 2, which in most cases will require each SEC-registered investment adviser ("RIA") to produce a narrative, plain English disclosure document, sequenced in a specified order to promote comparability among registrants. Form ADV Part 2 will be required to be (i) provided to clients and prospects, (ii) filed with regulators and (iii) made available to the general public through the SEC-sponsored Investment Adviser Public Disclosure website ("IAPD") (http//www.adviserinfo.sec.gov). The Part 2 Amendments are intended to ensure that current and prospective clients receive clear, meaningful and useful information about the RIA and relevant personnel who provide advice to and/or interface with clients.
The Part 2 Amendments will significantly change the manner in which RIAs describe to clients, the RIA's business, investment practices and potential conflicts of interest and will result in greater transparency about the approximately 11,000 RIAs currently registered with the SEC – as well as the significant number of new registrants expected to register with the SEC as a result of the provisions of the Private Fund Investment Advisers Registration Act of 2010, enacted as Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank").2 Many of these new registrants, including in particular a large number of private equity and hedge fund managers in the United States and abroad, which previously relied on the "Private Adviser Exemption" provided by Section 203(b)(3) of the Investment Advisers Act of 1940, as amended ("Advisers Act"), are likely to face particular challenges in responding to the disclosure requirements imposed by the Part 2 Amendments. Background In 2000, the SEC proposed amendments to the entire Form ADV.3 At that time, only the amended Form ADV Part 1 (and related electronic filing requirement for that portion of the Form ADV) was adopted, leaving the revisions to Part II of Form ADV in a state of limbo for eight years. In 2008, the SEC re-proposed amendments to Part II of Form ADV,4 which have been adopted, with some modification, as the Part 2 Amendments. While the Part 2 Amendments are clearly based on the portions of 2000 Proposal (and related comments), the Part 2 Amendments also reflect many of the "hot issues" of the past ten y...See the full content of this document
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