The central component of state or SEC investment advisor registration is Form ADV. Form ADV is divided into two parts, Part 1 and Part 2. Part 1 is a form requiring specific answers to questions asked, while Part 2 requires a written disclosure in narrative format covering certain required topics, which is ultimately delivered to existing and prospective clients. This article addresses Part 1 of ADV. For a discussion of the requirements of Part 2, see our article: Form ADV Part 2.
Form ADV Part 1 is further subdivided into two subparts: Part 1A and Part 1B. Part 1A is used for both SEC and state registrations. Part 1B is used only for state registrations. Form ADV Part 1 must be filed online through the FINRA system as part of the investment advisor registration process.
ADV Part 1A
Part 1A is a 46-page document consisting of twelve sections, three schedules, and a disciplinary reporting page. ADV Part the following: (1) general background information about the investment advisor, its owners, and officers; (2) discussion about business practices, including services provided and fees to be charged; (3) other activities of the investment advisor; and (4) certain disclosures about civil, criminal or other actions against the investment advisor, its owners and officers. The information in these sections is supplemented by the schedules and disciplinary reporting page.
There are three schedules in Part 1A of Form ADV, called Schedules A, B and D. Schedule A lists all direct owners of the investment advisor with an ownership interest of at least 5% and information about certain executive officers or individuals performing similar functions. Schedule B lists all indirect owners of the investment advisor with an ownership interest of at least 25%. Schedule D lists various miscellaneous information about the investment advisor such as, information about the investment advisor’s website, affiliated organizations, wrap fee programs and location of records.
Form ADV Part 1B
Part 1B of Form ADV is an eleven-page document and is used for investment advisors registering with specific states and not the SEC. It requests information about the states of registration, the individuals in charge of supervision and compliance, proof of bonding, and outstanding judgments, liens, and investment related arbitrations.
Investment advisor registration requires disclosures in compliance with complex state and federal regulation. An RIA registration applicant should consult an experienced investment attorney to assist them in navigating the intricacies of Form ADV. Learn more by reading our article Form ADV Part 2.
