Form ADV includes crucial information concerning registered investment adviser (RIA) firms aimed at helping regulators and investors understand these companies in greater detail. Due to the importance of keeping this information accurate, it is necessary to regularly update this form and to adjust it when material changes take place. Learn about ADV updates, including what a material change is and when to adjust each part of this form, and find out how an Oklahoma RIA registration lawyer from Altitude Securities Law Office can assist RIA firms with this type of documentation by calling (405) 534-4914.

What Does Form ADV Mean and What Are ADV Updates?

According to the United States Securities and Exchange Commission (SEC), Form ADV refers to the document that investment advisers use when registering with either a state securities authority or the SEC. The first two parts of this form are publicly available via the Investment Adviser Public Disclosure (IAPD) website. Investment advisers must file yearly updates to this document, taking care to include material changes and other activities and information that is vital to their firm.

This form encompasses the following sections:

  • Part 1: The SEC uses the information contained here for managing its examination and regulatory programs. This part requires investment advisers to give vital information concerning the firm, including the business’s ownership, key employees, affiliations, employee or advisor disciplinaries, and company practices. The format of this section entails filling in the blanks and checking boxes.
  • Part 2: For this part, investment advisers have to create an accessible, jargon-free brochure that discloses the firm’s disciplinary information, conflicts of interest, fees, and business practices. This is the most vital section of the form and investment advisers must present it to their clients.
  • Part 3: This section requires investment advisers that provide retail investment services to include a summary detailing their services, possible conflicts of interest, fees, references for additional information, disciplinary and legal history, and standards of conduct.

What Is Considered a Material Change to ADV Part 2?

RIA firms should make prompt updates to Part 2 when material changes occur. Such adjustments refer to changes to the majority of the items disclosed in Part 2A, including:

  • Fee arrangements
  • Services
  • Key personnel and leadership
  • Organizational structure
  • Contact information
  • Disclosed and new legal or regulatory issues
  • Relationships with external entities, brokers, custodians, and other related persons.

One effective method of determining whether an adjustment is material involves considering the change from an investor’s perspective. If the change is likely to influence an investor’s decision to become or remain a firm’s client, the amendment is probably material.

What Is a Non-Material Change?

This refers to a routine change that regulators and investors would reasonably expect to happen as time progresses. An example could involve the company’s client numbers and the total value of the assets the firm manages. Even though these are not material changes, when making annual changes, RIA firms should update these figures, in addition to the form’s other items.

How Often Does ADV Need To Be Updated?

Irrespective of whether the RIA firm registers with a state authority or the SEC, that business must submit an annual adjustment to the state authority or SEC no later than 90 days after the company’s fiscal year finishes. This includes Part 1 of Form ADV. Explore ADV updates in more detail and find out how an Oklahoma RIA registration attorney can help with Form ADV by arranging a consultation with Altitude Securities Law Office.

When To Update ADV Part 2A

If an investment adviser firm has a fiscal year ending in December, they must update Part 2A, and Appendix 1 if they have included this, within 90 days or by the end of March the following year. Key changes to make when performing the yearly update include compensation and business arrangement adjustments and changes to the firm’s conflicts of interest.

Throughout the rest of the year, firms should adjust this section when material changes occur within 30 days. They must deliver a summary of these adjustments to their clients, alongside a copy of this newly updated section or an offer to provide an updated brochure, within 120 days of the conclusion of the firm’s fiscal year (the end of April for fiscal years ending in December).

How Often Does ADV Part 2B Need To Be Updated?

Unlike Parts 1 and 2A, RIA firms do not need to update Part 2B annually. Instead, they only need to update this section when material changes take place. That said, these firms should ideally review this section every year to identify whether adjustments are necessary.

If the investment advisory firm decides to register with a state authority, it must submit any updates to this part of the form to the Investment Adviser Registration Depository (IARD). In contrast, RIA firms registered with the SEC are not required to file these updates and instead, need only maintain copies of these changes. When material changes occur, requiring an update to Part 2B, these firms must promptly give copies to their clients, regardless of whether they are state- or SEC-registered investment advisers.

What Are the Consequences of Incorrectly Filing ADV Updates?

Since investors and regulators rely on the information contained in these updates, it is vital that the details be complete and accurate. RIA firms can potentially receive regulatory sanctions and fines, in addition to reduced client trust and negative publicity, if they file these changes incorrectly. To avoid these consequences, consider these tips:

  • Avoid waiting until close to the deadline to start making these changes
  • Adopt a methodical, organized approach to completing these amendments
  • Involve other company leaders and assign different sections to the relevant departments to encourage interdepartmental collaboration and ensure completeness and accuracy

Contact an Oklahoma RIA Registration Attorney Today

Staying on top of the filing requirements and ensuring the inclusion of the relevant changes to Form ADV, can be a daunting experience, particularly for newly established RIA firms. If looking to establish an RIA, consider contacting a seasoned Oklahoma RIA registration attorney for assistance with filing the necessary forms and keeping them correctly updated. Discover more about ADV updates and learn how Altitude Securities Law Office can help RIA firms by contacting (405) 534-4914.