The filing and delivery deadline for the new Form CRS/Form ADV Part 3 relationship summary is fast approaching, and many investment adviser firms have not yet prepared the answers for the ADV Part 3 Conversation Starters which are included in the text of a Form ADV Part 3 relationship summary.
An investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) must file its initial Form ADV Part 3 relationship summary via IARD by June 30, 2020 and ensure it is delivered to existing clients no later than July 30, 2020.
State registered investment advisers that are registered with the Oklahoma Department of Securities and Rhode Island Securities Division are also now required to prepare and file the Form ADV Part 3 relationship summary; please click here to read more about Oklahoma’s specific Form ADV Part 3 filing requirements and here to learn about Rhode Island’s specific Form ADV Part 3 filing requirements.
Preparing for Retail Investor Questions About the Form ADV Part 3
Once an SEC registered investment adviser firm begins delivering the Form CRS/ADV Part 3 relationship summary, it must be prepared to answer client questions about the disclosure brochure. Unlike the Form ADV Part 2A or Part 2B, the SEC requires the new Form ADV Part 3 relationship summary to include example questions, called Conversation Starters, that retail investors are encouraged to ask the investment adviser.
While the answers to these Conversation Starters are not required to be included within the brochure, investment advisers and their representatives need to be prepared to answer each question in a competent and consistent manner. For many of the Conversation Starters, the investment adviser can prepare short sample scripts or elevator speeches that its investment adviser representatives can tailor to the client at hand.
Training the investment adviser firm’s representatives on how to answer the Conversation Starters is vital to ensure consistency across the investment adviser firm and compliance with the rule. The Form ADV Part 3 relationship summary, along with any conversations about its contents, must be truthful, accurate and not misleading. Particular care should be taken by investment adviser firms disclosing disciplinary history to ensure that conversations about such history are factual and do not misrepresent events.
By having regular training and reviewing investment adviser representative’s communications with clients regarding the Form ADV Part 3 relationship summary, an investment adviser firm can identify, prevent, and mitigate any non-compliant statements or actions occurring related to the Form ADV Part 3 relationship summary. The presence (or absence) of such training will be noted by the SEC during any examination focusing on Form ADV Part 3 compliance.
To assist your investment adviser firm with developing its Conversation Starter Scripts and compliance training program, RIA Compliance Consultants has developed a Sample Conversation Starter Script for SEC registered investment adviser firms. This Sample Script covers each of the eight Conversation Starter questions that may be applicable to investment adviser firms, and includes multiple options that the investment adviser can customize to its unique circumstances. Click here to purchase the Form ADV Part 3 – Conversation Starters Script.
Other Resources
On June 24, 2020 RIA Compliance Consultants will host a webinar, “Compliance with Form ADV Part 3 Requirements.” During this webinar, Bryan Hill, President of RIA Compliance Consultants, Inc., will discuss the initial delivery requirements to existing clients, the use of electronic delivery, the requirement to post to the website and hyperlinking to Form ADV Part 2A, the obligations to update, file and deliver after material changes and SEC examination issues. Click here to purchase your seat to this webinar.
For further assistance determining whether your investment adviser firm is required to deliver a Form ADV Part 3/Form CRS or for more information on the Form ADV Part 3/Client Relationship Summary, you can review the SEC’s Form ADV Part 3 instructions here or visit our Form ADV Part 3 FAQs website page here. Click here to read OCIE’s Risk Alert for Form CRS Compliance. You can also watch RCC’s recent complimentary compliance training webinar detailing the Form ADV Part 3/Form CRS by clicking here. The complimentary webinar slides are available here.
To read our three part blog on Drafting Tips for the Form CRS/Form ADV Part 3 relationship summary, click here for Part 1 – “Preparing to Draft Your Form ADV Part 3”. To read Part 2 – “Drafting the Content of Your Form ADV Part 3”, click here. To read Part 3 – “Style and Technical Considerations”, click here.
Contact Us
If your investment adviser firm is an existing client of RIA Compliance Consultants and would like assistance developing customized Conversation Starter scripts and/or IAR training, we encourage you to speak with your compliance consultant. Or, if you are not an existing client of RIA Compliance Consultants, click here to set up an introductory call with our Business Development Team.
Posted by RCC
Labels: ADV Part 3, Form ADV
