Form ADV Parts 1 & 2
Overview
*📌 The registration process for federal-covered and state-registered advisers is largely the same. You can assume the same general process applies whether an adviser registers with the Securities and Exchange Commission (SEC) or the state administrator.
The required disclosures for investment advisers during registration are similar to the required disclosures for broker-dealers. ⚠️ The key difference is the form used:
| Registrant | Registration form |
|---|---|
| Broker-dealers | 🔑 Form BD |
| Investment advisers | 🔑 Form ADV |
Form ADV has three distinct sections: Part 1, Part 2A, and Part 2B.
🔑 Numbers, forms & deadlines
| Item | Exact form / requirement |
|---|---|
| Investment adviser registration form | 🔑 Form ADV |
| Broker-dealer registration form | 🔑 Form BD |
| Form ADV Part 1 | Divided into Part 1A and Part 1B (⚠️ on the exam, both are typically referred to simply as “Part 1”); identifies the firm, describes its business, discloses key personnel |
| Form ADV Part 2A | 🔑 The “brochure” — client-facing disclosure document |
| Form ADV Part 2B | 🔑 The “brochure supplement” — personnel disclosure document for IARs |
| Consent to service of process | 🔑 Must be signed and submitted with every initial registration application; ⚠️ it does not need to be renewed |
| Filing fee | Must be paid with the registration paperwork |
| Notice filing (federal-covered advisers) | 🔑 Submit to each state administrator: (1) copy of Form ADV submitted to the SEC, and (2) filing fee |
| Minimum educational requirements for IARs | ⚠️ None — educational background is disclosed on the brochure supplement, but there are no minimum educational requirements for IARs |
| Disciplinary disclosure scope (Part 2A) | Convictions of any felony or a securities-related misdemeanor |
🔑 Definitions
| Term | Definition | Example |
|---|---|---|
| Advisory affiliate | > “Any current employee (except for clerical roles) / All officers, directors, and/or partners / Any other person controlling the firm (making big business decisions)” | A director of the advisory firm whose regulatory events must be disclosed on Form ADV Part 1 |
| Discretionary account | > “An account that provides the adviser with investment control; requires trading authorization or power of attorney (POA). This type of account is required for the adviser to make any of the following choices on behalf of an investor: Action (buy or sell) / Amount (how much) / Asset (what security)” | An adviser deciding to buy 100 shares of XYZ for a client without contacting them first |
| Wrap account | > “An investment account that offers a wide range of services, including investment management, trade execution, and financial planning, with all services ‘wrapped’ up into one single fee” | A single annual fee covering management, trading, and planning |
| Custody | > “Holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them” | An adviser that holds client cash or securities, or can obtain possession of them — must disclose on Part 1 of Form ADV |
| Fiduciary duty (NASAA description) | > “[The requirement for] the adviser to hold the client’s interest above its own in all matters” | The client’s interests must come first |
| Conflict of interest | Any circumstance, relationship, or event that could compromise the adviser’s fiduciary obligation | An adviser paid by a third party to recommend a specific security |
Discretion = the three A’s: Action (buy or sell), Amount (how much), Asset (what security).
Form ADV Part 1
Form ADV Part 1 is divided into two sections: Part 1A and 1B. ⚠️ On the exam, both are typically referred to simply as “Part 1.”
The purpose of Part 1 is to identify the firm, describe its business, and disclose key personnel.
These are the important disclosures on Part 1 (many overlap with broker-dealer disclosures):
| Category | Required disclosures |
|---|---|
| Basics of the business | Name; EIN (tax reporting number); Business address; Contact person |
| Other jurisdictions | Disclosure of registration with other states |
| Business structure | Corporation, partnership, sole proprietorship, or LLC |
| Business dynamics | Firm executives (officers, directors, partners); Types of products and services to be offered; Amount of assets under management (AUM); Whether the adviser maintains custody |
| Business history | Qualifications (financial and legal); Any legal actions ruled against the firm or its advisory affiliates; Any regulatory events related to the firm or its advisory affiliates (e.g., another state administrator revoked registration); Any criminal events related to the firm or its advisory affiliates |
Broker-dealers vs. investment advisers — what they provide
| Firm type | What they provide |
|---|---|
| Broker-dealers | Generally execute securities transactions and often provide custodial services |
| Investment advisers | Provide advice about what securities transactions should be performed |
Advisory services an investment adviser can offer
| Advisory service |
|---|
| General securities advice and/or market commentary |
| Financial planning |
| Portfolio management (including discretionary accounts) |
| Wrap accounts |
All of the products and services listed above are considered advisory business. They may be offered only by registered investment advisers (or those that may claim an exemption or exclusion). In practice, most investment advisers focus on advisory products and services.
Custody
However, an adviser may also operate in ways that resemble a broker-dealer. One example is custody.
Clients need a firm to hold cash and securities, but “custody” is a regulatory concept with specific requirements. 📌 Custody rules and requirements for investment advisers are covered in a future chapter. For now, remember:
- Some investment advisers take custody.
- 🔑 If an adviser takes custody, it must disclose that on Part 1 of Form ADV.
Form ADV Part 2A (the brochure)
Form ADV Part 2A contains the information clients typically care most about. It explains how the adviser operates, how it gets paid, and where conflicts of interest may exist.
Because this document is meant for investors, the SEC and the North American Securities Administrators Association (NASAA) (the association that represents all state administrators) require Part 2A to follow these standards:
| 🔑 Part 2A required standards |
|---|
| Narrative format |
| Plain English |
| Disclosure of fiduciary obligations |
| Full and truthful disclosure |
This is why Part 2A is commonly called “the brochure”: it’s designed to be readable and understandable.
Fiduciary duty & conflicts of interest
Part 2A also requires disclosure of the adviser’s fiduciary obligation. NASAA describes the fiduciary duty as:
“[The requirement for] the adviser to hold the client’s interest above its own in all matters”
In other words, the client’s interests must come first.
A key part of fiduciary duty is disclosing conflicts of interest. A conflict of interest is any circumstance, relationship, or event that could compromise the adviser’s fiduciary obligation.
| Example conflicts of interest |
|---|
| An adviser is paid by a third party to recommend a specific security to its clients |
| An adviser recommends the securities of an affiliated or parent company |
| An adviser recommends a purchase of a security that will be sold from their own inventory |
A practical way to think about it: if a reasonable client would want to know about it before accepting the recommendation, it likely belongs in the conflict disclosures.
Advisers must disclose conflicts and also mitigate (reduce) them as much as possible.
Specific disclosures required in Part 2A
| Category | Required disclosures |
|---|---|
| General business characteristics | Description of the business; How long the adviser has been in business; Types of advisory services offered, including any specialties; How the advisor tailors their business to clients; Description of wrap fee programs; How much of the business is dedicated to discretionary services |
| Fees and compensation | How the adviser is compensated; Payment logistics (how clients may pay); Fees collected outside of advisory services; If fees may be prepaid, and if they are refundable; If the adviser is paid by parties other than clients |
| Types of clients | Type of client the adviser typically handles; Any prerequisites for doing business with adviser (e.g. having a minimum amount to invest) |
| Investment philosophy | Types of securities recommended; Methods of securities analysis; Description of risks clients are exposed to |
| Disciplinary information | Convictions of any felony or a securities-related misdemeanor; Any regulatory action taken against the adviser or its controlling affiliates |
| Conflicts of interest | Relationships with relevant third parties; Payments received by third parties; Any other item that may compromise the fiduciary obligation |
Form ADV Part 2B (the brochure supplement)
Form ADV Part 2B is typically called the “brochure supplement.” It’s a personnel disclosure document.
It covers investment adviser representatives (IARs) who:
- Provide advice to clients, and/or
- Act in a discretionary capacity (for example, an IAR who invests client assets but doesn’t meet with the client)
Clients can use Part 2B to learn the following about these employees:
| Disclosed information |
|---|
| Educational background* |
| Business experience |
| Disciplinary information |
| Other business activities (outside of the adviser) |
| Additional compensation (outside of normal compensation) |
| Supervision details |
*⚠️ Although educational background is disclosed on the brochure supplement, there are no minimum educational requirements for IARs.
Form ADV part comparison
| Part | Nickname | Audience / purpose | Key contents |
|---|---|---|---|
| Part 1 (1A and 1B) | — | Identify the firm, describe its business, disclose key personnel | Business basics, other jurisdictions, business structure, business dynamics (incl. AUM and custody), business history |
| Part 2A | 🔑 The brochure | Clients — how the adviser operates, how it’s paid, conflicts | Narrative, plain English, fiduciary obligations, full and truthful disclosure; business characteristics, fees, client types, investment philosophy, disciplinary info, conflicts of interest |
| Part 2B | 🔑 The brochure supplement | Clients — personnel disclosure on IARs providing advice and/or exercising discretion | Education, business experience, disciplinary info, other business activities, additional compensation, supervision details |
Consent to service of process
- Like other registrants, the consent to service of process must be signed and submitted with every initial registration application (⚠️ it does not need to be renewed).
- This requirement also applies to investment advisers.
- 📌 The text points to the broker-dealer chapter that explains this document in detail.
Filing fees
- As with other registrants, a filing fee must be paid with the registration paperwork.
- 📌 The text points to the broker-dealer chapter for details on how filing fees work.
Sidenote — Form ADV for federal-covered advisers
State-registered advisers file Form ADV with the state administrator, while federal-covered advisers file Form ADV with the SEC. Each regulator enforces rules for the advisers registered with it.
| Regulator | Oversees | Generally does NOT regulate |
|---|---|---|
| The SEC | Federal-covered advisers | State-registered advisers |
| State administrators | State-registered advisers | Federal-covered advisers |
Even though federal-covered advisers don’t typically interact much with state administrators, they must still notify each state before doing business there. This is called a notice filing.
🔑 To legally operate in a state, a federal-covered adviser submits the following to that state administrator:
| Notice filing contents |
|---|
| Copy of Form ADV submitted to the SEC |
| Filing fee |
After the notice filing, the SEC remains the primary regulator for the federal-covered adviser.
However, state regulators are not completely powerless with respect to SEC-registered advisers. If a state administrator suspects a federal-covered adviser is engaging in fraudulent practices in that state, the administrator may investigate and pursue action against the adviser (sometimes in tandem with the SEC).
Key points
Form ADV
- Investment adviser registration form
Form ADV Part 1
- Discloses the basics of the business, including:
- General business information
- Other jurisdictions
- Business structure
- Business dynamics
- Business history
Form ADV Part 2A
- Also known as the “brochure”
- Discloses important information relating to clients, including:
- General business characteristics
- Fees and compensation
- Types of clients serviced
- Investment philosophy
- Disciplinary information
- Conflicts of interest
Form ADV Part 2B
- Also known as the “brochure supplement”
- Discloses information on IARs involved in:
- Providing securities advice
- Roles exercising discretion
- Disclosed information:
- Educational background*
- Business experience
- Disciplinary information
- Other business activities
- Additional compensation
- Supervision details
Federal-covered advisers
- File Form ADV with SEC
- Must provide notice filing to state, which includes:
- Copy of Form ADV submitted to the SEC
- Filing fee
- The state administrator may not regulate these advisers
- If fraud is suspected, administrator may investigate
More from Investment advisers: State registered vs. federal covered · Financial requirements · Effective registration · Post-registration obligations · Exemptions
Sources
Primary/official references for the material in this chapter. Every link was fetched and returned HTTP 200 on 2026-08-15.
| # | Source | Publisher |
|---|---|---|
| 1 | Investment Advisers Act rules (206(4)-x, custody, brochure) | eCFR (17 CFR Part 275) |
| 2 | Model Rule 102(a)(4)-1 — unethical practices of IAs and IARs | NASAA |
| 3 | Adviser and IAR public disclosure — Form ADV as filed | SEC (IAPD) |
| 4 | Achievable Series 65 — chapter 4.3.3.2 | Achievable (course text) |