As your investment adviser firm is getting ready to deliver the new Form ADV Part 2 to its investment advisory clients, you may be considering electronic delivery as an option.
The U.S. Securities and Exchange Commission (“SEC”) will permit an investment adviser to deliver the Form ADV Part 2 electronically; however, certain conditions must be met. The following are some of the key requirements.
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First, prior to electronic delivery, your investment adviser must obtain consent from the client. A best practice for obtaining consent is to include a specific provision in your investment adviser’s client agreement or utilize a separate form signed by the client. The SEC has explained that telephonic consent is also acceptable as long as the telephonic consent is recorded and retained (for example via a recorded phone line, or written confirmation of the telephonic consent).
Second, your investment adviser should take action to ensure that the client knows that the Form ADV Part 2 is available electronically, which may require supplementing the actual electronic communication.
Third, the information available in the electronic format should be comparable to the information available in paper format. Accessing the Form ADV Part 2 electronically should not be unduly burdensome. The Form ADV Part 2 may be delivered in pdf format if the client can easily access the documents; for example, your investment adviser could inform the client of the requirement to download pdf files and provide the instructions for downloading pdf viewer software at no cost.
Fourth, your investment adviser is required to have reason to believe that the electronic delivery of the Form ADV Part 2 was successful, which may be evidenced by obtaining evident of the actual receipt (for example, electronic-mail return receipt), or facsimile delivery receipt.
to view the SEC’s full rules regarding electronic delivery.
Finally, regardless of whether the client has opted for electronic delivery, you investment adviser is required provide a paper copy of the Form ADV Part 2 whenever a paper copy is specifically requested by the client.