Thursday, March 11, 2010

Fun with Form ADV Part 2

There are several testable points concerning the adviser's disclosure brochure, which is usually just a copy of Form ADV Part 2. Let's look at a possible test question:

Which of the following is/are accurate of Form ADV Part 2?
I. it must be delivered within 48 hours after signing the advisory agreement with a new client
II. it must be delivered to existing clients requesting it in writing within 5 days
III. it must be filed with the Administrator
IV. it must be delivered to all prospects

A. I
C. I, IV

EXPLANATION: if this particular question showed up on the exam, it would be one of the hardest-hitting questions in the batch. Choice I looks good--but it's backwards; the disclosure contained in the brochure must be delivered 48 hours before you sign the agreement with clients, or at the time of signing if they have 5 days to cancel without losing any prepayment. Advisers offer to send the thing to existing clients, and if clients send a written request, advisers must send it within 7--not 5--days. In the old days ADV 2 did not have to be filed with the Administrator, but now it does. Finally, the brochure is not required if the client is a registered investment company or if the advice is considered "impersonal," meaning that it does not purport to be specific to individual clients.


You can view an actual ADV Part 2 at

No comments:

Post a Comment