Know What Constitutes an ADV Material Change

Think you only have to file your ADV annually? Do you know what counts as a material change for your ADV? At RegVerse, we are here to help guide you on when your ADV may fall outside the annual filing and would need to be filed as a material change occurs.

What times change annual during annual updates? The annual amendment is used to update items such as assets under management, number of clients, number of accounts, and number of employees.

For ADV Part 2 (more commonly known as the brochure), an amendment is triggered any time information provided therein becomes materially inaccurate.

For instance, under SEC Rule 206(4)-4, an investment advisor must make prompt disclosure to clients when an advisor’s financial condition is likely to impair its ability to meet contractual commitments to clients or when there’s a legal or disciplinary event material to the evaluation of an advisor’s integrity or ability to meet contractual commitments to clients. This disclosure is in addition to amending ADV Part I and usually is in the form of an updated ADV Part II delivered promptly to new and existing clients.

An investment adviser must promptly update the brochure and distribute to clients if the information contained in it becomes materially inaccurate. This updated brochure is referred to as an “interim amendment”.

Material events must be filed promptly with regulators, which, for the SEC and most states, means within 30 days.

Changes to the ADV Part II that are considered material include:

• Firm name change
• Firm revision of legal structure
• Revisions to advisory program administration or custodian
• Changes in any fees
• Portfolio structure changes
• The addition or removal of a director, officer, or investment advisor representative
• Changes to the firm’s or its affiliate’s outside business activities

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Resources used:

Form ADV - General Instructions (sec.gov)

Staff Responses to Questions About Part 2 of Form ADV (sec.gov)

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Key Terms: ADV, Brochure, Part 2, Material change, Interim change, Interim, Form ADV