On July 28, 2010, the SEC released final amendments to Part 2 of Form ADV, also known as the Brochure, the principal disclosure document that federally registered investment advisers must provide to their clients and prospective clients. Among other changes, the Brochure amendments mandate expanded Brochure content presented in a plain English narrative, electronic filing to permit public review and comparison of Brochures on the SEC website, and delivery of "Brochure supplements" containing résumé-like information regarding advisory personnel providing services to clients. In order to comply with the new rules, investment advisers will need to take prompt action to significantly adapt or overhaul their existing Brochures. Aside from simply developing plain English narrative disclosures as required by the various Brochure items, investment advisers will need to evaluate the substance and manner of presentation most appropriate for conveying information to clients. While the various disclosure items must be presented in the prescribed order, there will be opportunities to draft documents that maximize efficiency. For example, the rules permit investment advisers to create and file "separate brochures for different types of advisory clients, each of which may be shorter, clearer, and contain less extraneous information than would a combined brochure," provided that "each client receives all information about the services and fees that are applicable to that client." Additionally, investment advisers offering a more extensive array of services should note that it is permissible to include summary information at the beginning of their Brochures. Because the new Brochures will be publicly available on the SEC website, investment advisers may want to consider how their business practices, policies and procedures, discussion of fee arrangements, and conflicts of interest may be viewed in light of the easily accessible disclosure contained in the Brochures of other advisers (including members of their peer group). Investment advisers, therefore, may want to review their business practices and reevaluate their compliance policies and procedures in what will amount to a more transparent and more competitive marketplace. Additionally, investment advisers would also be well advised to review the disclosure in their current offering memoranda, if any, and to harmonize that disclosure with the proposed disclosure in the Brochure.

Advisers applying for registration with the SEC after January 1, 2011, must file a Brochure (or Brochures) that complies with the new rules, and deliver to clients and prospective clients a Brochure and supplements in the manner described above. Already registered advisers with a fiscal year end of December 31, 2010, must file a new Brochure in compliance with the new rules no later than March 31, 2011, and deliver such new brochure to their existing clients within 60 days of filing. Pursuant to an SEC extension announced on December 28, 2010, already registered advisers with fiscal years ending on December 31, 2010, through April 30, 2011, will now have until (i) July 31, 2011, to deliver Brochure supplements to new and prospective clients; and (ii) September 30, 2011, to deliver Brochure supplements to existing clients. All newly registered advisers filing for registration from January 1, 2011, through April 30, 2011, will now have until (i) May 1, 2011, to begin delivering Brochure supplements to new and prospective clients; and (ii) July 1, 2011, to deliver Brochure supplements to existing clients. The Lowenstein Sandler Investment Management Group alert summarizing the new Form ADV Part 2 requirements is available here. Details relating to the SEC’s extension for delivery of the Brochure supplements may be found in the most recent edition of the Lowenstein Sandler Investment Management Group’s quarterly newsletter, which is available here.