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News April 25, 2005 Issue

ADV Advice

When preparing your firm’s Form ADV Part II Schedule F, look at the proposed version of Part 2 in addition to the current version. The proposal, said Rick Cohen, managing partner of Buchalter, Nemer, Fields, & Younger, sets out a “more sophisticated and intricate” way of disclosure. “You really need to look at both,” he said, “even though the new one is not effective.”

Cohen advised CCOs to keep their firm’s Form ADV on their desks, in front of them all the time. For example, when leaving a business meetings, look at the ADV and see if what was just discussed is consistent with what is disclosed on the firm’s ADV, he said.


He also noted that asking your firm’s business people to review the relevant ADV disclosure is perhaps the “least offensive” place to start to ask for buy-in.


How to identify conflicts?


Cohen noted that when a client hands its money over to an adviser to be managed, the client thinks that “every single thing” the adviser does with that money will benefit the client. “That’s the concept that we start with,” said Cohen. He suggested that advisers working on Form ADV sit down and think: “What do I do in my business that departs from that very basic concept?” What does the firm do “that departs from using client assets for their exclusive benefit?”


NRS consultant Keith Marks noted that the SEC may question whether particular disclosures will “stand out” from the morass of information contained in the ADV. To address this, “use some headings” and “separate these issues out,” he said.