Chapter 5 Part 1 Flashcards
IAs register by completing
Form ADV
The adviser files these forms electronically through the
Investment Adviser Registration Depository (IARD) system, which is operated by FINRA (although FINRA does not regulate the IARD).
The IARD system is similar to FINRA’s Central Registration Depository (CRD) system and was created to
make the filing of documents faster and more convenient
If there are technical difficulties with the IARD system that prevent electronic filing, or if the system will not accept the form, the adviser may
file Form ADV manually. When filing electronically, the typed name of the adviser’s authorized officer is considered irrefutable evidence that the appropriate person has signed the application
Form ADV Part IA is completed by
all firms regardless of their status as a state or federal adviser
Form ADV Part IA, when completed, will include information about
the investment business, the form of ownership, the type of client and any disciplinary events involving the investment adviser, the investment adviser representative, and other employees
Form ADV Part IA includes The name, address, education, and business affiliations for the past
10 years of each partner, officer, director, or any person performing a similar function
Form ADV Part IA includes How the investment adviser will maintain
custody of client assets
Form ADV Part IA includes Whether the investment adviser or any person associated with the firnm is subject to any
disqualification that would be a basis for denial, suspension, or revocation of registration as an investment adviser
Form ADV Part IA includes A statement as lo whether the principal business will consist of
investment supervisory services. An investment supervisory service is defined as the giving of continuous advice on the investment of funds on the basis of the individual needs of each client.
Form ADV Part lB is completed only by firms that are
registering al the state level. Registrants must complete this section of the Form and forward to the respective state Administrator in order to be granted registration at the stale level.
Even though Part I of Form ADV is not information required to be disclosed to the public, the SEC
makes the information available to them through the Investment Adviser Public Disclosure (IAPD) Website.
Slate laws require that contracts between clients and state-registered advisers be
in writing
Part 2 ofFonn ADV must be filed with
“either the state(s) or the SEC
through the IARD system. Every registered investment adviser is required lo provide clients with Form ADV Part 2A. In lieu of Form ADV Part 2A, a brochure substantially equivalent to the form can be produced. The firm brochure describes the adviser’s overall business”
Form ADV Part 2B will provide the
appropriate brochure supplements. These supplements disclose information about the specific personnel (supe1vised persons) who handle clients’ accounts
Information provided on Form ADV Part 2A or the firm brochure must be written in
“a narrative, plain English formal that takes into consideration the client’s level of sophistication and must disclose all
the adviser’s actual and potential conflicts of interest.”
An investor entering into a contract with a state-registered adviser must be offered the brochure and supplemental docwnentation at least
48 hours prior to signing the contract. If the client is not provided the documents within that time frame, the client is given a minimum of 5 days to cancel his contract without penalty.
When a client opens an account with a federal covered adviser, the adviser must deliver its firm’s brochure
either prior to or at the time the client opens the account. There is no 48-hour delivery window stipulated under federal law
An adviser must give all its existing clients either an
updated version of its brochure or a summary of material changes to its old brochure along with an offer to provide the new brochure annually. The delivery must take place within 120 days after the end of the adviser’s fiscal year
Form ADV Part 2B will provide all financial conditions that are
reasonably likely to impair the adviser’s ability to meet contractual commitments to clients
