SEC set to approve new ADV Part 2

Key disclosure documents expected to be more investor-friendly but will require ‘significant’ revisions to advisers’ current forms

Jul 19, 2010 @ 3:02 pm

By Dan Jamieson

A full decade after first proposing to revamp form ADV Part 2, the Securities and Exchange Commission is set to approve revisions to this key disclosure document this week.

Adviser groups for years have been urging the SEC to take action on the redesign of the ADV Part 2. They contend that the new narrative form will be more investor-friendly than the old check-the-box format.

The ADV Part 2 includes information on business practices, conflicts of interest and background of individual advisers and advisory firm personnel who work with clients.

The plan is to disclose ADV Part 2 on the SEC's website rather than simply requiring advisers to give it to new clients. Advisers will have to prepare “plain-English" written narratives for the new form.

The change "will require a significant effort by all investment advisers to revise their current Part 2 forms," David Tittsworth, executive director of the Investment Adviser Association, wrote in an e-mail.

The SEC is scheduled to vote on the new adviser registration form at its open meeting this Wednesday.

In recent weeks, regulators have taken other steps to harmonize the disciplinary disclosures of advisers and brokers. In June, state regulators rolled out an online disclosure system for advisers similar to the BrokerCheck system run by the Financial Industry Regulatory Authority Inc. The system covers all individual advisers, regardless of whether their advisory firms are registered with the SEC or a state.

This month, the SEC approved a Finra rule to increase the amount of disciplinary information disclosed through BrokerCheck.

Together, the changes make similar the amount of data disclosed online about both brokers and advisers.


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