What Is SEC Form ADV? Definition, Requirements, and How to File

What Is SEC Form ADV?

The Securities and Exchange Commission (SEC) requires all professional investment advisers to submit SEC Form ADV. This form specifies the investment style, assets under management (AUM), and key officers of an advisory firm. This form must be updated annually and it must be made available as a matter of public record for companies that manage funds in excess of $25 million.

There are several parts of SEC Form ADV. The first section includes identifying information, If past disciplinary action was taken against the adviser, this must be noted in the first section of SEC Form ADV. The second section deals with the AUM, investment strategy, fee arrangements, and service offerings of the firm.

Understanding SEC Form ADV

Who Can File SEC Form ADV?

Officially called the Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Adviser, SEC Form ADV serves as a registration document that must be submitted to the SEC and to state securities authorities.

The North American Securities Administrators Association (NASAA) reviews and approves changes made to the document, and it is supported by the Financial Industry Regulatory Authority (FINRA).

Potential and current clients of an investment adviser should always review the SEC Form ADV on file. That's because it provides transparent evidence of the asset mix within the firm, as well as the professional background of key personnel.

How to File SEC Form ADV

As noted above, there are several parts to this form. We've highlighted some of the key information found in each below.

Part 1

The first portion of Form ADV is organized as fill-in-the-blank (often easier for the adviser to compile) and includes details about:

• The adviser’s business
• Its ownership structure and breakdown
• Any affiliations
• All relevant business practices
• Current and historical clients
• Details on its key and other employees
• Any disciplinary events involving the advisory firm and/or its employees

The SEC reviews the information provided by the firm from this part of the form to process registrations and manages its regulatory and examination programs.

Part 2

The second section of the form is a longer narrative that is prepared by the investment adviser. This must be written in plain English and contain detailed information on the specific types of advisory services offered, the fee schedule of the adviser, disciplinary information, and any conflicts of interest. This latter part may include details on whether any directors have outside business interests that could impact their judgments or provide inside information.

This part should also include management background—their educational history and business experiences. These bios should extend to key advisory personnel, as well. This section is the most important primary disclosure document offered to clients by investment advisers. Brochures are always available to the public once they are filed.

SEC Form ADV Part 2 must also include a supplement, which details information about key employees who directly provide investment advice to clients.

Annual Updates to SEC Form ADV

All investment advisers are required to submit annual updates to their brochures. This includes any and all material changes that occur within the firm and any information and/or activity that takes place that is critical to their business.

SEC Form CRS

SEC Form ADV previously included Part 3, which was meant to serve as a summary of the previous sections. As such, it was called the relationship summary. In June 2019, the SEC amended the form and spun the third section off into an altogether new form called SEC Form CRS or the Relationship Summary.

The form is meant to "deliver to retail investors a brief customer or client relationship summary that provides information about the firm." It must be filed with the SEC by every firm that provides retail investment services to their clients and it must be submitted to these individuals.

As noted above, SEC Form CRS is a summary of information from SEC Form ADV. Therefore, advisers must include the following information:

• Identifying information
• Services provided
• Client relationships
• Fees and costs
• Conflicts of interest
• Standards of conduct
• Disciplinary action
• Additional details

The form must be concise and written in plain English so it can be easily understood.

How to Access SEC Form ADV

To request a copy of Form ADV, contact the SEC branch closest to you. Potential and current clients of an investment adviser should always review the Form ADV on file, as it provides transparent evidence of the asset mix within the firm and the professional backgrounds of key personnel.

Download SEC Form ADV

Here is a link to a downloadable SEC Form ADV.

The Bottom Line

SEC Form ADV is one of just a number of filings that investment advisers and firms must submit in order to remain compliant. Investors can use this information to help guide them when choosing or making changes to their investment team(s). As such, it's important for firms to ensure that the information submitted is concise and written in simple English that can be easily understood by anyone reading it. Keep in mind that the information submitted must be accurate. Any misleading information may result in the revocation of registration, fines, and even prosecution.