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Form ADV-E

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What Is Form ADV-E?

Form ADV-E is the electronic version of Form ADV, which includes a certification of client assets, both cash and securities, that are held by a Registered Investment Adviser. Form ADV-E is required by FINRA and the SEC pursuant to the Investment Adviser’s Act of 1940. It is evaluated by an independent accountant for accuracy and compliance.

The ultimate purpose of the form is to ensure proper handling of client assets. It contains information about the adviser and the state of the practice along with a listing of client securities and holdings.

Key Takeaways

  • Form ADV-E is a required filing by custodians of financial assets on behalf of customers and provides information about the custodian and the assets held.
  • Form ADV-E is the electronic form of Form ADV.
  • The form is required by the SEC and is now administered online by FINRA’s IARD online system.

Understanding Form ADV-E

In December 2009, the SEC approved amendments to the custody rule under the Investment Advisers Act of 1940 and related forms. The amendments, among other things, require most registered investment advisers that have custody of client funds or securities to undergo an annual surprise examination by an independent public accountant to verify client funds and securities.

The SEC requested that FINRA build and deploy an automated means to submit the Form ADV-E electronically. Form ADV-E submission is now automated through the Investment Adviser Registration Depository (IARD) as a form filing type. A complete ADV-E filing consists of a uniform cover page and a certificate of accounting (surprise examination report or termination statement) of securities and funds in possession or custody of an investment adviser. The surprise examination report is created by an independent accountant after a surprise inspection of the adviser/custodian

The information contained within a Form ADV is important for all potential and current investors — just as you would thoroughly research any important financial decision, like buying a home or a car.

Parts of Form ADV-E

More formally, Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs.

Beginning in 2011, Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients.

Investment advisers are required to deliver annually to clients a summary of material changes to the brochure and either deliver a complete updated brochure or offer to provide the client with the updated brochure. In addition, an investment adviser must deliver to clients a brochure supplement that provides information about the specific employees, acting on behalf of the investment adviser, who actually provide the investment advice to the client.

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