On February 13, the Securities and Exchange Commission proposed to amend Form ADV Part II, which registered investment advisers use to describe their business. The Form ADV Part II and related rule amendments will require investment advisers to prepare and deliver to clients and prospective clients a narrative brochure written in plain English. The proposed brochure dispenses with the check-the-box format currently used and must be filed electronically and available to the public via the SEC-sponsored Investment Adviser Public Disclosure web site.

The narrative would publicly disclose to investors more detailed information about an investment adviser's business practices, services, fees, anticipated investor risks, conflicts of interest, and disciplinary history. Among the conflicts of interest proposed to be highlighted in the narrative are the use of affiliates to execute transactions, the use of client brokerage to obtain “soft dollars benefits,” the adviser’s interests in certain transactions, the side-by-side management of clients who pay performance fees (such as hedge funds) and those who do not, and an adviser’s receipt of compensation from issuers of financial products the adviser recommends to clients. The narrative will also provide additional information about the qualifications of employees who give advice to clients.