SEC Reviews Form ADV Investor Advisor Brochure Requirements

The SEC reviewed Form ADV requirements regarding the Investment Adviser Brochure and Brochure Supplement (Parts 2A and 2B of Form ADV, respectively).

In an Investor Bulletin, the SEC stated that the Investment Adviser Brochure must disclose the following information "written in plain English":

• a description of the advisory business;
• fees and compensation;
• performance-based fees and side-by-side management;
• methods of analysis, investment strategies and risk of loss;
• disciplinary information;
• code of ethics, participation or interest in client transactions and personal trading; and
• brokerage practices.

In addition, the SEC noted that an investment adviser must give a client a Brochure Supplement for each individual that it supervises who: (i) formulates investment advice for that client and has direct client contact; or (ii) makes discretionary investment decisions for that client's assets, even if the supervised individual has no direct client contact. The Brochure Supplement sets forth the following disclosure requirements:

• educational background and business experience;
• disciplinary information;
• other business activities;
• additional compensation; and
• supervision.

Brochure Supplements are not filed with the SEC.