What Is a Form ADV and Why Does It Matter?

Form ADV is a regulatory document promoting transparency within the investment advisory industry. It provides detailed insights into the operations and practices of financial advisers, helping individuals make informed decisions when selecting an investment professional. This document ensures investor protection by making information about financial advice providers readily accessible.

Defining Form ADV

Form ADV, formally known as the Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Adviser, is a mandatory filing for investment advisers. This document must be submitted to either the U.S. Securities and Exchange Commission (SEC) or relevant state securities authorities. Its purpose is to furnish regulators and the public with essential details concerning an investment adviser’s business operations, including services, fee structures, and any disciplinary history. This regulatory requirement helps maintain oversight of the financial advisory landscape. Advisers are typically required to update their Form ADV annually to reflect any material changes to their business.

Entities Required to File

Investment advisers are generally required to register with either the SEC or state securities authorities, with the determining factor often being the amount of client assets under management (AUM). Advisers managing $100 million or more in client assets are typically mandated to register with the SEC. Conversely, investment advisers with less than $100 million in AUM usually register with the securities authority in the state where their principal office is located.

There are specific circumstances and exemptions that can alter these general rules. For example, advisers who manage certain types of funds, such as venture capital funds, may qualify as “Exempt Reporting Advisers” and have different filing requirements for Form ADV. Additionally, an adviser may be required to register with the SEC regardless of AUM if they advise a registered investment company or if they would otherwise be required to register in numerous states.

Key Information within Form ADV

Form ADV is structured into several parts, each providing distinct categories of information. Part 1, presented in a check-the-box and fill-in-the-blank format, collects fundamental data about the advisory firm. Part 1A requires disclosure of basic identifying information, such as the firm’s legal name, business address, and contact details. It also covers the firm’s business practices, the types of clients it serves, its assets under management, compensation arrangements, and any disciplinary events involving the firm or its advisory affiliates.

Part 1B is a supplemental section that only state-registered advisers are required to complete. This part includes additional state-specific questions beyond the federal requirements.

Part 2 of Form ADV is designed as a narrative brochure, intended for clients and prospective clients. Part 2A, often referred to as the firm’s brochure, details the services offered by the adviser, its fee schedule, and the types of clients it typically serves. It also explains the firm’s investment strategies, potential risks, and any conflicts of interest that might arise. Disciplinary information related to the firm is also included in this part.

Part 2B, known as the brochure supplement, provides specific information about the individuals within the firm who directly advise clients. For each supervised person with direct client contact or discretionary investment authority, this supplement outlines their educational background and business experience for the past five years. It also discloses any material legal or disciplinary events involving that individual, helping investors evaluate their qualifications and background.

Accessing and Interpreting Form ADV

The general public can access filed Form ADV documents through the Investment Adviser Public Disclosure (IAPD) website (adviserinfo.sec.gov). This online database is maintained by the SEC and FINRA, providing a centralized resource for investor information. Users can search by the firm’s name or its Central Registration Depository (CRD) number to view the most recently filed Form ADV for both SEC-registered and state-registered investment advisers.

When interpreting a Form ADV, investors should focus on several key areas. Review the sections detailing the adviser’s fee structure and compensation arrangements. Examine the disciplinary history sections in both Part 1A and Part 2A, as well as the individual disciplinary disclosures in Part 2B. Understanding the services offered and the types of clients the adviser typically works with, as outlined in Part 2A, is also important for alignment. The IAPD website also includes information about individual investment adviser representatives.