Wednesday, April 13, 2011

Washington Sets Forth Form ADV Part 2 Client Delivery Requirement

Washington-registered investment advisers have until June 1, 2011 to deliver to their clients a copy of the advisers’ most recent Part 2 of Form ADV. This is an annual requirement but unlike past years that allowed advisers to offer to deliver a copy of Part 2 to the clients, the Washington Department of Financial Institutions requires actual delivery this year because of the major revisions made to Part 2. Investment advisers must also provide their clients with a copy of the advisers' privacy policy in accordance with Federal Trade Commission rules.

By March 31, 2011, investment advisers were required to send the Department of Financial Institutions a fiscal year-end requirements form dated December 31, 2010 and showing for advisers whose principal place of business is in Washington a net worth of at least $35,000 if the advisers had custody of client funds or a net worth of at least $10,000 if the advisers had discretionary authority but not custody over client funds; investment advisers headquartered in another state needed to only check that they complied with the other state’s net worth requirements, if any.

Investment advisers were also required by March 31, 2011 to electronically file through the IARD Parts 1 and 2 of Form ADV, as well as a Form BR for each advisory branch office in Washington. Regarding Part 2, disclosures for all 19 items of Part 2A must have been included together with a draft of Part 2B for each of the advisers’ investment adviser representatives, but item 19 of Part 2A could have been used in place of Part 2B if there were but a few investment adviser representatives. Note that a copy of Part 2 did not need to be sent to the Department directly since it is was being submitted electronically through the IARD.