Form ADV Part 1 and Part 2

What Form ADV contains

Form ADV is the central disclosure and filing form used by investment advisers to register with the SEC or states and, for some advisers, to make reports. It has several parts with different audiences and purposes. Part 1 collects structured information about the adviser’s business and ownership. Part 2 is the narrative brochure and brochure supplement. A form filing is not SEC approval or a recommendation of the adviser, strategy, or securities it offers.

Part 1A contains information about the advisory firm, including its identity, ownership, business practices, clients, assets, affiliations, disciplinary information, custody, and other regulatory details. Applicants generally submit it electronically through the Investment Adviser Registration Depository (IARD). State-registered advisers may have state-specific requirements or schedules. Exempt reporting advisers file specified portions as a report rather than as a full registration application. The correct questions depend on the adviser’s status.

Part 1 is structured for regulators and public databases. Its checkboxes and data fields make firms easier to compare and allow regulators to review operations, conflicts, and disciplinary history. The form should reflect actual current practices. A checkbox that appears small can signal custody, affiliations, or a conflict requiring explanation. Advisers should reconcile the filing with their client agreements, marketing materials, books, and compliance procedures rather than treating the annual amendment as a clerical exercise.

Part 1B is generally associated with state registration and can request additional state information. Its use and applicability depend on the jurisdiction and filing status. A firm should not assume that SEC registration removes every state notice or individual registration requirement, or that a state-specific schedule applies to every SEC filing. Check the instructions for the relevant Part and the state’s rules.

Understand the two parts of Part 2

Part 2A is the firm brochure. It explains the adviser’s services, fee arrangements, methods of analysis and investment risks, disciplinary history, conflicts of interest, brokerage practices, account review, custody, and other information in plain narrative form. For SEC-registered advisers, the brochure is filed electronically and must generally be delivered to clients as required by the Advisers Act rules. A client should be able to understand how the adviser is paid and where incentives may differ from the client’s interests.

Part 2B is the brochure supplement for supervised persons who provide advice to clients. It gives information about the individual, such as education and business background, disciplinary events, other business activities, and additional compensation or conflicts. SEC advisers generally deliver the applicable supplement to clients, but Part 2B is not filed with the SEC in the same way as Part 2A. The supplement helps the client assess the person giving advice, not just the firm.

Worked case: a client receives a firm brochure listing an asset-based fee and describing the adviser’s investment approach. The client then meets with a portfolio manager whose outside business and disciplinary history appear in a brochure supplement. Part 2A explains the firm-level service and conflicts; Part 2B gives person-specific information. One document does not replace the other, and handing over Part 2A alone may not satisfy the individual disclosure requirement.

Form ADV is updated when required. SEC-registered advisers generally file an annual updating amendment within 90 days after the end of their fiscal year and amend promptly when certain material information changes, under the applicable rules and form instructions. The exact obligation depends on the filer’s status and the item. State advisers and exempt reporting advisers have their own relevant amendment and reporting requirements. Always check the current rule instead of assuming every filer follows an identical schedule.

Read, deliver, and update disclosures

The brochure-delivery rule also sets timing and options. A registered adviser generally provides the brochure to a client before or at the time it enters into an advisory contract, subject to rule details. Annual delivery of an updated brochure or a summary of material changes may be required for existing clients, and a client may need an offer to receive the complete brochure. Use current Rule 204-3 and the adviser’s client type; exceptions and delivery method matter. Do not substitute a public website link without checking the applicable delivery requirement.

A brochure is disclosure, not a guarantee that conflicts have been eliminated. If the adviser receives compensation from product providers, trades through an affiliated broker, or has an incentive to recommend one account type over another, the brochure should describe the relevant conflict and how it is addressed. A client should read disclosures together with the advisory agreement and ask how a conflict affects a recommendation. Generic language that does not explain the actual practice may not help the client understand the relationship.

The public can review adviser filings through the SEC and state Investment Adviser Public Disclosure (IAPD) system. A search can show registration or reporting forms and related firm or individual information. This is a useful starting point for checking a firm’s identity and disclosures. It is not a substitute for confirming the legal entity, reading current documents, or contacting a regulator when a detail is unclear. A similar business name or a copied Form ADV may be used in an impersonation attempt.

Worked case: an investor searches for “North Shore Advisory” and finds two firms with similar names. The investor should compare the official firm name, CRD number, address, registration status, and website listed in IAPD with the person who made contact. If the firm says it is SEC registered but the public filing shows a different entity, pause and verify through regulator contact information. The database helps verify identity, but it does not certify that a proposed investment is appropriate or safe.

Use IAPD to verify a firm

Form ADV Parts 1 and 2 do not replace Form CRS where the adviser is subject to the separate relationship-summary rule. Form CRS is a concise relationship summary for specified retail investors; Form ADV offers more detailed firm and person disclosure. The client may receive both. Do not describe one as a substitute for the other, and do not imply that every adviser has the same Form CRS obligation regardless of client type.

An adviser’s Form ADV should be consistent across parts. If Part 1 says the firm provides financial planning and manages portfolios, but Part 2 describes only an investment-management service, the discrepancy deserves review. If the form lists a conflict but a marketing page says the service is conflict-free, the firm should reconcile those claims. Disclosure documents are part of the adviser’s compliance system and should match how it actually works.

Changes in ownership, custody, disciplinary events, fee schedules, client types, or business practices may require an amendment. A firm should assign responsibility for gathering data from legal, finance, operations, and advisory staff. Waiting until year-end to find a material change can make the filing inaccurate for months. A documented calendar and event-triggered review help the adviser maintain current information and deliver updates when required.

A practical reading sequence for a prospective client is to confirm identity and registration in IAPD, review Part 1 for firm structure and reported practices, read Part 2A for services, fees, conflicts and risks, and review the relevant Part 2B for the individual adviser. Compare the disclosures with the proposed contract and ask about anything inconsistent. For a regulator or compliance officer, the sequence begins with filing status and current amendments, followed by consistency testing across the documents and actual operations.

A practical review sequence

Do not treat “filed with the SEC” as “approved by the SEC.” Registration is not a government endorsement and does not guarantee investment results. A Form ADV can disclose disciplinary history, conflicts, and services, but the client must evaluate whether those services suit their needs. The adviser remains responsible for accurate and complete filings and applicable duties even when an investor does not read the forms.

On an exam, remember the division: Part 1 is structured firm information; Part 2A is the firm brochure; Part 2B is an individual brochure supplement. The filing and delivery rules are distinct. An SEC adviser files Part 2A electronically and delivers it as required, while Part 2B is delivered to clients but generally not filed with the SEC. State processes can add requirements. A public filing provides information, not regulatory approval.

An effective Form ADV review turns the document into questions: What service is being provided? How is the adviser paid? What conflicts could influence recommendations? Who will give advice? What background or disciplinary history is disclosed? Does the filing match the contract and actual service? This approach is more useful than scanning checkboxes without context. It also helps an investor distinguish a general disclosure from the specific terms of their own relationship.

Check the filing status before interpreting a form

The same Form ADV system serves different filers. An SEC registrant uses the form as its federal registration filing; a state adviser files through the same infrastructure to seek state registration; an exempt reporting adviser submits the portions required for its report. An investor viewing a public form should check the filing type, status, and date. A firm’s appearance in IAPD does not necessarily mean it is an SEC registrant, because reports and state filings can also appear there.

Part 1 and Part 2 work together but do not duplicate each other. Part 1 provides structured fields that let regulators and public users locate key operational facts. Part 2 describes services and conflicts in narrative form. If a Part 1 answer directs the reader to a brochure for context, read that section rather than assuming the checkbox is a complete explanation. Conversely, a narrative brochure should not contradict the firm’s structured filing. Each part has a different presentation and audience, and a complete review uses both.

Disclosure delivery can occur electronically when the applicable consent and delivery rules are satisfied. An adviser should keep evidence of what was delivered, to whom, and when. Sending a brochure to a client is separate from filing it on IARD, and a public record does not prove the client received the disclosure before entering the contract. The client should be able to access the current version and understand material changes. Follow the current rule and the delivery method the client accepted.

For an adviser managing multiple programs, one brochure may describe several services and fee arrangements. A prospective client should identify which program applies to the proposed account and compare the stated fee with the contract. If the firm offers a wrap fee program, the disclosure should explain the services and what expenses the fee covers under the applicable requirements. A broad brochure can be accurate while still requiring a client to ask which subsection governs the account being considered.

Review the date on each part and confirm that the adviser has provided its current version. An old brochure can omit changed fees, ownership, or conflicts even when the firm remains active in the database.