Apr 93 min read

A Guide To Disclosure Delivery for Advisory Firms

Now that the Annual Update Amendment of Form ADV has been filed for the majority of advisory firms, it's time to shift focus to the critical next step: delivering essential disclosures to clients. Understanding the intricacies of delivering these crucial documents is paramount. In this article, we'll delve into the delivery requirements for Form ADV Part 2A, Part 2B, Form CRS, and the Privacy Notice, assisting you in ensuring compliance.

Annual Update Amendment of Form ADV Part 2A and B

Form ADV Part 2A serves as a cornerstone of client communication, providing vital information about the advisory firm's services, fees, and disciplinary history. Each year, within 120 days of the end of the fiscal year, advisory firms must ensure clients receive either an updated brochure or a summary of material changes, maintaining transparency and ensuring clients are well-informed.

Form ADV Part 2B complements Part 2A by providing clients with essential information about individual investment adviser representatives within the firm. Typically provided before or at the time of entering into an investment advisory contract, Form ADV Part 2B enhances client understanding and confidence in those directly providing investment advice.

Form CRS (Client Relationship Summary)

Form CRS serves as a pivotal document in fostering transparency and clarity in the advisor-client relationship. It must be filed initially upon the creation of the firm and updated only when material changes occur. For initial filing, investment advisers must submit Form CRS electronically through the Investment Adviser Registration Depository (IARD), while broker-dealers utilize the Central Registration Depository (Web CRD®) operated by FINRA. The document must be delivered to retail investors before or at the time they become clients, ensuring transparency from the outset.

Moreover, any material changes to Form CRS must be promptly communicated to existing clients, maintaining ongoing transparency and compliance. Within 30 days of any updates, investment advisers and broker-dealers must deliver the revised document to existing retail investor clients, highlighting the most recent changes to ensure clients remain informed.

Additionally, ongoing delivery requirements mandate that the most recent relationship summary must be provided to existing clients or customers in specific situations. This includes instances where the advisor opens a new account different from the client's existing accounts, recommends rolling over assets from a retirement account, or suggests a new brokerage or investment advisory service or investment that doesn't necessarily involve opening a new account.

Privacy Notice

Privacy notices must be provided initially and annually during the continuation of the client relationship. Whether delivered through hand delivery, mail, or electronic means, the notice should accurately reflect the firm's privacy policies and practices, ensuring clients remain informed and empowered by knowing how their personal information is shared. In numerous instances, advisory firms only share information with technology and service providers necessary for delivering their advisory services.

Consolidated Delivery

Streamlining the delivery process can enhance efficiency and client understanding. Consolidating Form ADV Part 2A and the Privacy Notice into a single communication reduces administrative burdens while ensuring clients receive all necessary information.

Electronic Delivery

Embracing electronic delivery offers convenience for both firms and clients. With proper authorization, disclosure documents can be delivered electronically, accompanied by evidence of delivery, to meet regulatory requirements.

Website Posting

Many firms enhance accessibility by posting Form ADV Part 2A, Form CRS, and the Privacy Notice on their websites. This practice not only facilitates client access but also helps demonstrate a commitment to transparency and regulatory compliance.

In conclusion, adherence to delivery requirements for Form ADV Part 2A, Part 2B, Form CRS, and the Privacy Notice is essential for advisory firms to uphold transparency, foster client trust, and ensure regulatory compliance. By understanding and implementing these delivery processes effectively, firms can navigate compliance with confidence while prioritizing client transparency and satisfaction.

All information provided is for educational purposes and shall not be construed as specific advice. The information does not reflect the view of any regulatory body, State or Federal Agency or Association. All efforts have been made to report true and accurate information. However, the information could become materially inaccurate without warning. Not all information from third-party sources can be thoroughly vetted. Coulter Strategic Services and its staff do NOT provide legal opinions or legal recommendations. Nothing in this material should be considered as legal advice or opinion.

If you would like specific compliance education, training, and services to help with your compliance program or project, please contact Coulter Strategic Services.

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