Business Compliance Partners Reminds Investment Advisors About New Annual Amendment Requirements

Share Article

Recent changes to Form ADV Part 1 and the new ADV Part 2A format will impact the annual amendment filing requirements for investment advisors. Business Compliance Partners has drafted the following summary of those changes.

An investment advisor is required to file an annual amendment within 90 days after the end of its fiscal year. December is the fiscal year-end for most investment advisors. Due to Investment Adviser Registration Depository (“IARD”) system availability the upcoming filing window is from January 3 to March 30, 2012.

Form ADV Part 1 was revised in November 2011 to accommodate the registration, reporting, and recordkeeping requirements triggered by the Dodd-Frank regulations along with other general updates. There are approximately 20 new questions that must be answered in order to submit the annual amendment filing.

Advisors are being asked to provide additional information about their business, other business activities, financial industry affiliations, employees and clients. In addition, a checkbox was added to allow filers to request the removal of a “Disclosure Reporting Page” for any criminal, regulatory action or civil judicial event that was filed in error.

As part of the annual amendment process, advisors will now be required to update their ADV Part 2A Brochures and upload updated versions to the IARD system.

Any material changes must be disclosed in the Part 2A Brochure or in a separate material changes summary document. If there were no material changes the advisor must state that there were no material changes since the last annual amendment.

An advisor may have to deliver a Part 2A Brochure free of charge to all current clients within 120 days after the end of its fiscal year. In the alternative, the advisor may elect to deliver a copy of a material changes summary. An offer to provide a copy of the entire Part 2A Brochure upon request must be included with the summary. Instructions regarding how to obtain the Brochure and additional information about the advisor must also be provided with the offer.

An advisor that is registered with the Securities and Exchange Commission is not required by the SEC to deliver a material changes summary or a Part 2A Brochure if their most recent brochure does not contain materially inaccurate information and no brochure updates were filed with material changes between annual amendment filings.

However, states may impose regulations that are contrary to SEC regulations when they govern activities within their jurisdiction. Under these circumstances, offering to provide a copy of the Part 2A Brochure is a sound default option. SEC registered advisors can also check with the states where they are conducting business. Advisors that are registered at the state level should check with the applicable regulatory authorities.

Investment advisors that are regulated at the state level may be subject to financial reporting and other requirements in connection with the annual amendment process. These requirements will vary based on the types of services the advisor offers. Generally distinctions are made regarding advisors that manage assets on a discretionary basis; advisors that have custody or have affiliates that have custody; and other advisors.

When an advisor is registered in multiple states, the primary regulator is the regulator in the state where the advisor maintains its principal place of business. Most states have safe harbor provisions. The safe harbor provisions exempt an advisor from many of the regulatory requirements of a state as long as the advisor is in compliance with the requirements of the state where it maintains its principal place of business.

Generally the ADV Part 2B Brochure Supplement doesn’t have to be updated, distributed, or offered on an annual basis but this may vary from state to state. It must be updated if the information becomes materially inaccurate or as needed.

Click the following link for more information about individual state annual amendment filing requirements.

Business Compliance Partners can assist with annual amendment filings and other compliance needs. The firm’s principals have diverse backgrounds with over three decades of experience in the securities industry including advisory, brokerage, regulatory, legal, and consulting positions. You can also visit the Business Compliance Partners website or call us at 888-538-6088.


Share article on social media or email:

View article via:

Pdf Print

Contact Author

Paul Cox

Chris Kosifas
Visit website