Speak To A Live Person: 888.302.4594 Request A Demo

Investment Advisers and Required Disclosures

Friday, January 20, 2017

So often I hear individuals tell me that one of the reasons they are leaving the broker dealer community to set out on their own and start their own investment adviser is so that they will no longer be under the thumb of FINRA. As a registered investment adviser representative (RIA) of a registered investment adviser this is true, to an extent.

It is true that FINRA has no jurisdiction over either SEC or state registered investment advisers. However, one thing many investment advisers forget is that they are still required to complete and update the ADV Part 1 for the registered adviser and Form U4 for all RIA representatives.  Additionally, they seem to forget that there are still required disclosures that have to be made on the Form U4, ADV Part 2 A and B.

It is important to remember that many of the same disclosable events that apply to registered representatives of a broker dealer also apply to registered investment advisers and their RIA representatives.  For the registered investment adviser, it is important to carefully review the instructions to the ADV Part 2A, Item 9, and the Part 2A Appendix 1 of Form ADV: Wrap Fee Program Brochure if managing accounts through any type of wrap fee program. If you are a state registered investment adviser you also need to carefully review the instructions to the ADV Part 2A, Item 19. The disclosures do not stop there. All RIAs of the adviser should pay close attention to instructions to Part 2B, Item 3, and Item 7 if you are a state registered investment adviser.

As stated earlier, the disclosures do not stop with the Parts 2 A and B. Registered investment advisers still have to visit IARD to look at and review the instructions to the ADV Part 1, Item 11. If there are any yes answers to any of the questions contained within Item 11, there will need to be a DRP completed for each yes answer. All RIAs of the adviser need to look at and review the instructions to the Form U4, Item 14. And like the adviser, RIAs will also have to complete a DRP for every yes answer for each yes answer to the questions contained under Item 14.

In addition to regulatory disclosures, one also has to ensure that all outside business has been disclosed. Again we must look to the instructions of the ADV Part’s 1 and 2 and the Form U4 to ensure that all outside activities of the Adviser and its RIA representatives are disclosed according to the instructions.

Some may think that if they inadvertently forget to disclose an event, or series of events, that are required to be disclosed on the ADV or U4 that the regulators will go easy on them because it was an honest mistake. This is not true. If in doubt, please see the below Administrative Orders executed by the Texas State Securities Board.




About Red Oak Compliance Solutions

Red Oak Compliance Solutions is a leading provider of intelligent compliance software, offering a range of AI-powered solutions designed to help firms of all sizes successfully navigate the increasingly complex regulatory landscape. Our suite of 17(a)-4/WORM compliant features offer risk minimization, cost reduction, and process optimization capabilities with features that are designed to evolve with our client’s needs. Our flagship advertising review software enables firms to deliver compliant content to the market with confidence, faster. Our Disclosure Management and Intelligence solution simplifies the management of disclosures, while our Registration Management solution automates and streamlines the licensing and registration process, further enhancing your internal processes. 

  • Categories

  • Get Started