Now that your Form ADV Part 2A is drafted and filed, what’s next? While the new ADV rule primarily concerns the content and filing of Part 2A, the effects of the rule extend beyond the document itself. You should consider how the new rule affects certain aspects of your compliance program.
The new rule amended the delivery requirements for ADV Part 2A, known as the brochure. The new requirements are as follows:
- Initial delivery: You must deliver the brochure to new clients before or at the time you enter into an advisory agreement.
- Annual delivery: If you have material changes to your brochure since your last annual filing, you must deliver within 120 days after your fiscal year end either:
- An updated brochure that includes a summary of material changes within Item 2 or is accompanied by a separate summary of material changes; or
- A summary of material changes that includes an offer to provide a copy of the updated brochure and information on how client may obtain an updated brochure.
Also, don't forget about Part 2B, the brochure supplement, which discloses certain information regarding supervised persons working with your clients. Since you are required to deliver this supplement before or at the time the supervised person begins providing services to a client, you might consider delivering the supplement with the brochure to ensure you meet your delivery obligations.
Often policies incorporate or refer to specific ADV disclosures. Your compliance manual may benefit from a review to ensure the policy language is consistent with that in your new brochure.
Also, you’ll want to update any policies that directly relate to delivery of your brochure, such as a Client Disclosure or Registration policy, to reflect the new delivery requirements indicated above.
If you include the annual updating amendment of Form ADV Part 1 on your calendar, be sure to add Part 2A to that endeavor. Going forward, you are required to file material changes to Part 2A along with your updated Part 1. Consider adding this new requirement to your calendar so your brochure is updated appropriately. Again, update your delivery requirements on your calendar as well.
Consider also requiring that those supervised persons for whom you’ve drafted a brochure supplement annually review their disclosures. Like the brochure, the supplement information must be materially accurate and up-to-date.
Investment Management Agreement
Are there references to your brochure in your IMA, such as in a section where the client certifies receiving the document? If so, you should update any language referring to your delivery requirements. Furthermore, the disclosure brochure is probably listed as the "ADV Part II," rather than "ADV Part 2A" or "brochure." Lastly, if you intend to deliver your brochure and supplement(s) to clients at the same time, consider adding the Part 2B certification to your IMA as well.
Do you supply broker-dealers with your IMA or disclosure brochure? What about solicitors or investment consultants? Remember to consider any third party that may be required to deliver your brochure and ensure they have the most current documents and that they understand the delivery requirements.