Under new SEC rules, registered investment advisers (RIAs) are required to deliver to clients and prospective clients a brochure supplement, Form ADV Part 2B, disclosing information about its supervised persons who advise such clients. (This is in addition to the main firm brochure on Form ADV 2A). Part 2B includes information about the supervised person’s education and business background, disciplinary history, outside business, sales compensation and supervision. There is no filing requirement.
To comply with this new rule, RIAs must begin delivering brochure supplements to new and prospective clients by July 31, 2011. RIAs have until September 30, 2011 to deliver brochure supplements to existing clients.
You must prepare a brochure supplement for both of the following:
- any supervised person who formulates investment advice for a client and has direct client contact
- any supervised person who has discretionary authority over a client’s assets, even if the supervised person has no direct client contact
Note: No supplement is required for a supervised person who has no direct client contact and has discretionary authority over a client’s assets only as part of a team. If investment advice for a client is provided by a team comprised of more than five supervised persons, a current brochure supplement need only be delivered to that client for the five supervised persons with the most significant responsibility for the day-to-day advice provided to the client.