M E M O R A N D U M
|SUBJECT:||Proposed Amendments to Part II of Form ADV|
|DATE:||February 1, 2001|
On January 22, 2001, Robert Plaze, Jennifer Sawin, Jennifer McHugh, and Marticha Cary met with Karen Barr and David Tittsworth of the Investment Counsel Association of America (ICAA) and David Oestreicher of T. Rowe Price Associates, Inc. (T. Rowe Price) to discuss the Commission's April 5, 2000 proposal to amend Part II of Form ADV and related rules. The meeting focused primarily on the proposed brochure supplement, but also covered the proposed brochure delivery and updating requirements and certain proposed brochure disclosure items.
Following is a summary of the issues raised by representatives of ICAA and T. Rowe Price during the two-hour session. ICAA will be submitting a supplemental comment letter further elaborating on the issues below and suggesting workable alternatives.
SEC staff asked how ICAA and T. Rowe Price would suggest the Commission draw the line between giving or formulating investment advice and simply communicating it. Should there be a presumption that all registered investment adviser representatives provide (and not simply communicate) advice to clients?
No changes have been proposed to the current rule, which permits multiple brochures only where an adviser offers substantially different advisory services.
The current system already requires all material information to be disclosed to clients. Advisers could "manage" the updating process, however; for example, an adviser could plan major changes in advance and provide updated disclosure at that time - or use separate brochures for separate services and send stickers to the relevant clients only.
Several commenters made erroneous assumptions about the scope of required disclosure, especially as it relates to policies and procedures. The adopting release will clarify that advisers must describe their policies and procedures in only a general way in perhaps no more than a sentence or two. It also will make clear that advisers need not respond to items that do not apply to their business. Cutting back on some proposed disclosure items (e.g., wrap fee and periodicals listings) also may be considered.