DEFINITION of 'Form ADV'

Form ADV is a required submission to the Securities and Exchange Commission (SEC), by a professional investment advisor, which specifies the investment style, assets under management (AUM), and key officers of an advisory firm. Form ADV must be updated annually and made available as public record for companies, managing in excess of $25 million.

If past disciplinary action has been taken against the advisor, this must be noted in the first section of a Form ADV. The second section deals with the AUM, investment strategy, fee arrangements, and service offerings of the firm.

BREAKING DOWN 'Form ADV'

Officially called the Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Adviser, 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 advisor should always review the Form ADV on file, as it provides transparent evidence of the asset mix within the firm, as well as the professional background of key personnel.

Most advisors will offer a current Form ADV to any potential client early in the marketing process; in fact, investors should be immediately cautious of an advisor that does not freely offer the form upon request.

Form ADV: Parts I and II

More specifically, the first portion of Form ADV is organized as fill-in-the-blank (often easier for the advisor to compile) and includes: details about the adviser’s business, its ownership structure and breakdown, along with any affiliations; all relevant business practices; current and occasionally historical clients; and details on its key and other employees. Finally, it will always include any disciplinary events involving the advisory firm and/or its employees. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs.

Section 2 of the ADV is a longer narrative, prepared by the investment advisor. 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 (as with Part 1), any conflicts of interest (e.g. if any directors of the firm have outside business interests that could impact their judgments or provide inside information. Part 2 also should include management background – their educational history and business experiences. These bios should extend to key advisory personnel, as well. Section 2 is the most important primary disclosure document, which investment advisers offer their clients. Brochures are always available to the public once filed.

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 Form ADV

All investment advisors are required to submit annual updates to their brochure (e.g. all material changes within the firm and critical to their business).

Accessing a Form ADV

To request a copy of Form ADV, contact the SEC branch closest to you. Potential and current clients of an investment advisor 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.

RELATED TERMS
  1. Investment Advisor

    An investment advisor is any person or group that makes investment ...
  2. SEC Form 15

    SEC Form 15 is a voluntary filing with the regulator by publicly ...
  3. SEC Form F-4

    SEC Form F-4 is a filing that the Securities and Exchange Commission ...
  4. Form 144

    Form 144 is filed with the Securities and Exchange Commission ...
  5. Federal Covered Advisor

    A federal covered advisor is a U.S.-based investment advisor ...
  6. SEC Form ADV-NR

    A request for the appointment of agency with the SEC. This type ...
Related Articles
  1. Financial Advisor

    What Triggers an SEC Audit for Financial Advisors?

    Advisors looking to avoid an SEC audit should pay heed to this list of what may catch the regulator's attention.
  2. Investing

    Is Your Broker Legit? 6 Steps to Take

    The Great Recession may be over, but broker wrongdoing hasn't. How to avoid the next Bernie Madoff.
  3. Personal Finance

    How to Select a Financial Advisor to Work With

    If you are looking to engage a professional advisor, consider these important criteria.
  4. Personal Finance

    Why One Financial Advisor Is Enough

    Some affluent investors use multiple advisors but doing so is not a good idea for a variety of reasons.
  5. Personal Finance

    Why You Should Find the Right Financial Advisor

    If you find the right one for you, financial advisors offer many value added services.
  6. Personal Finance

    Tips for Finding a Military-Focused Financial Adviser

    If you are in the service, using these tips may help you decide if you need a financial adviser.
  7. Financial Advisor

    Advisors Face More SEC Reporting Requirements

    The SEC has mandated that investment advisors provide more disclosure on separately managed accounts and performance numbers used in advertising.
  8. Personal Finance

    8 Questions to Ask a Potential Financial Advisor

    Ask these eight simple questions before hiring a financial planner.
  9. Tech

    Going Independent: What Advisors Should Expect

    Thinking of going independent with your financial advisory practice? Here are some things to consider.
  10. Tech

    Management Fees: How Advisors Can Protect Them

    With management fees falling, advisors are wondering what they can do about it. Here are a few tips.
Trading Center