After years of speculation by investment advisers regarding when the proposed changes to the Form ADV Part II would be implemented, the Securities and Exchange Commission (SEC) unanimously adopted the proposed changes on July 21, 2010. The changes will clearly raise the bar on how disclosures will be made to investment advisory clients and will result in all investment advisers making major modifications to their existing Form ADV Part II by the end of the first quarter 2011.

Under the amended rule advisers will have to provide new and prospective clients with brochures that are organized in a consistent and uniform manner, and that contain expanded plain English disclosures of the adviser’s business practices, fees, conflicts of interest, and disciplinary information. Advisory firms must also provide “brochure supplements” to clients containing information about the employees who will provide the advisory services.

The implementation date of the amended rules and forms (the “Amended Rule”) will be effective 60 days after publication in the Federal Register. The SEC has postponed publication of the revised Form ADV, Part II until July 28th, 2010 in order to work with the states to accommodate technical, state-specific changes to the items and instructions on the form. However, the SEC made it clear that they intend for investment advisers to be distributing and publicly posting new brochures in the first quarter of 2011.

Daniel E. LeGaye, Author