A very important test topic to master for you upcoming series 65 exam is what appears on Form ADV and how its various parts are used.
An investment adviser will begin its formal registration process by filling out Form ADV. The ADV form will provide detailed information regarding the investment adviser and it is comprised of four parts: Part 1A, Part 1B, Part 2A, and Part 2B. Form ADV Parts 2 A and 2 B are provided to clients. ADV Part 1A includes general information about the investment adviser, including:
• Principal office address • Information regarding direct owners • Type of organization such as corporation or partnership • How the adviser will conduct business • If the firm engages in other activities such as that of a broker dealer • Biographical data on the officers, directors, or partners • Disciplinary history of the officers, directors, partners, and the firm • Location of books and records if other than principal office • If the adviser has custody of customer assets • If the adviser has discretionary authority over customer assets
ADV Part 1B provides details on the indirect owners of the firm and is filed with the state securities administrator for advisers registered at the state level. Advisers who are federally registered do not file ADV Part 1B. Form ADV Part 2A is the adviser’s narrative brochure and will disclose information relating to clients. ADV Part 2A will state:
• How and when fees are charged • Types of securities the adviser does business in • How recommendations are made • Type of clients the adviser has • Qualifications of officers and directors
Form ADV Part 2B provides information relating to individuals who:
• Provide investment advice and who have direct contact with advisory clients • Have discretion over client assets regardless of whether the individual has contact with clients
Test Tip !
Form ADV Part 2B talks about the people who give advice or deal with clients ( B for the bodies of the people who give advice )
New rules have been enacted to further enhance the required disclosures by investment advisers. These enhanced disclosure are designed to provide more information to both clients and regulators regarding the adviser’s business. Investment advisers must now also disclose the following on form ADV: The total number of offices and detailed information relating to the adviser’s 25 largest offices Detailed information regarding the adviser’s separately managed account including the type of assets held, the use of derivatives, leverage and ownership or operation of private funds Detailed information regarding the number of clients serviced by the adviser and amount of assets managed for each category of client ie individual, institutional etc Advisers with over $1 billion in assets under management must report the value of their AUM with in one of three ranges $1-10 billion, $10- 50 billion and greater than $50 billion Advisers who utilize social media must disclose all social media accounts such as Facebook, Twitter, Linkedin and all websites operated for the adviser’s business If the chief compliance officer of the firm is employed at any other adviser the fact must be disclosed to but not approved by regulators
Good Luck on your series 65 Exam
The Securities Institute