A Form ADV glossary is a plain-language guide to the terms, parts, and requirements that appear in the registration and disclosure document every investment adviser files with the Securities and Exchange Commission or a state securities regulator. The filing covers a firm’s ownership, fees, services, conflicts of interest, and disciplinary history, and it is publicly available. Once you know what the recurring vocabulary means, you can read a filing critically and see things a marketing brochure would never tell you.
The Parts of Form ADV
Form ADV is not one document but several, and each part answers a different question about the firm.
Part 1A
Part 1A is the check-the-box regulatory section. It collects identifying information, ownership, affiliations, client types, assets under management, and disciplinary history in a standardized format built for regulators to process rather than for clients to read.1Securities and Exchange Commission. Form ADV Part 1A You can still mine it for facts, but expect data, not prose.
Part 2A: The Firm Brochure
Part 2A is the narrative brochure written in plain English. It describes the firm’s advisory services, fee schedule, methods of analysis, client types, disciplinary events, and conflicts of interest.2Securities and Exchange Commission. Form ADV – Uniform Application for Investment Adviser Registration It is the single most useful piece of Form ADV for someone evaluating a prospective adviser. The firm must deliver it before or at the time you sign an advisory contract.3eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements
Part 2B: The Brochure Supplement
Part 2B shifts the focus from the firm to the person. Each supplement gives biographical and disciplinary information about a specific individual who will advise you, and you must receive one for each such person before they start providing advisory services.3eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements
Part 3: Form CRS
Part 3, known as Form CRS or the Client Relationship Summary, is a short plain-language summary that SEC-registered advisers must give to retail investors before or at the time they enter into an advisory contract.4Securities and Exchange Commission. Frequently Asked Questions on Form CRS It covers services, fees, conflicts, the firm’s standard of conduct, and whether the firm or its professionals have reportable disciplinary history, and it includes suggested questions you can ask the adviser.5Investor.gov. Relationship Summaries (Form CRS or Form ADV Part 3)
Who Files: Registration Terms
SEC-Registered vs. State-Registered
Where a firm registers depends on its size. An adviser with regulatory assets under management of $100 million or more may register with the SEC, and one reaching $110 million must apply for SEC registration. Once registered with the SEC, a firm can stay there as long as its assets remain at or above $90 million.6eCFR. 17 CFR 275.203A-1 – Eligibility for SEC Registration Firms below the threshold generally register with their home state’s securities authority. When you look up a firm, its registration status tells you which regulator oversees it.
Exempt Reporting Adviser
An exempt reporting adviser, or ERA, is a firm that qualifies for an exemption from full registration but still files limited information with the SEC. Two types qualify: venture capital fund advisers, and private fund advisers managing less than $150 million in total assets. ERAs file only selected items of Part 1A and are not required to file the Part 2 brochure.7Securities and Exchange Commission. Form ADV – General Instructions That is a real limit on what is publicly visible about these firms.
Regulatory Assets Under Management
Regulatory assets under management, or RAUM, is the figure that determines where a firm registers and gives a rough sense of its scale. The calculation includes the value of securities portfolios for which the adviser provides continuous and regular supervisory or management services. That covers discretionary accounts, and it also covers non-discretionary accounts where the adviser has ongoing responsibility to select or recommend investments and arrange trades if the client accepts.8U.S. Securities and Exchange Commission. Form ADV – Instructions for Part 1A RAUM is not a discretionary-only number.
Custody
Custody has a wider meaning in Form ADV than in everyday use. An adviser has custody whenever it holds client funds or securities, or has the authority to obtain possession of them. A general power of attorney over a client’s account or serving as general partner of a pooled investment fund both trigger the designation.
When custody applies, the firm must keep client assets with a qualified custodian, which generally means an FDIC-insured bank, a registered broker-dealer, or a futures commission merchant.9eCFR. 17 CFR 275.206(4)-2 The firm must also have a reasonable basis for believing the custodian sends quarterly statements directly to each client, and client assets must undergo an annual surprise examination by an independent public accountant.10U.S. Securities and Exchange Commission. Custody of Funds or Securities of Clients by Investment Advisers If custody is checked on the filing, those safeguards should appear in the brochure.
Fee Terms
Wrap Fee Program
A wrap fee program bundles investment advisory services and trade execution into a single asset-based fee. You pay one charge rather than an advisory fee plus separate commissions on each trade. Firms sponsoring these programs must provide a separate wrap fee program brochure (Appendix 1 of Part 2A) explaining costs, services, and conflicts.3eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements The built-in conflict is that every trade eats into the firm’s bundled fee, which can discourage trading when trading would help you.
Performance-Based Fee
A performance-based fee ties the adviser’s compensation to a share of your investment gains or the appreciation in your account. The Investment Advisers Act generally prohibits this because it can encourage excessive risk-taking on the client’s account.11Office of the Law Revision Counsel. 15 U.S. Code 80b-5 – Investment Advisory Contracts
Qualified Client
The exception to that prohibition is the “qualified client.” To meet the standard, you must have at least $1.1 million in assets under management with that specific adviser, or a net worth exceeding $2.2 million, excluding your primary residence.12U.S. Securities and Exchange Commission. Fact Sheet – Inflation Adjustments of Qualified Client Thresholds These thresholds were last adjusted for inflation in August 2021, and the SEC has indicated it will next review them on or about May 1, 2026, so the numbers may change during 2026.13eCFR. 17 CFR 275.205-3 – Exemption From the Compensation Prohibition of Section 205(a)(1)
Fiduciary Duty
The reason Form ADV requires such extensive disclosure is that registered investment advisers owe their clients a fiduciary duty. The SEC has interpreted this as two obligations. The duty of care means the adviser must provide advice in your best interest, seek best execution of trades, and monitor investments on an ongoing basis. The duty of loyalty means the adviser cannot put its own interests ahead of yours and must fully disclose all material conflicts.14Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers When you read the disclosures about affiliations and conflicts, you are reading the adviser’s attempt to satisfy that loyalty obligation.
Related Persons, Affiliations, and People
Related Person
A related person is anyone affiliated with the advisory firm: officers, partners, directors, and any entity that controls or is controlled by the adviser. Control means the power to direct a firm’s management or policies through voting securities, contract, or other means. Form ADV requires these relationships to be identified because they can shape the advice you get.
Broker-Dealer Affiliation
When the adviser or a related person is also a registered broker-dealer, the filing must disclose it. An adviser affiliated with a brokerage may have incentives to steer clients toward transactions that generate commissions for the brokerage side. Look in the brochure for specific mitigation steps rather than a vague promise.
Supervised Person
A supervised person is anyone who provides investment advice on the firm’s behalf and is subject to the firm’s oversight, including officers, partners, directors, and employees in advisory roles. Their background and qualifications appear in Part 2B brochure supplements.
Disciplinary History and Disclosure Reporting Page
Form ADV requires disclosure of criminal, civil, and regulatory actions involving the firm or its advisory affiliates, including felonies, investment-related misdemeanors, and adverse findings by regulators such as the SEC or FINRA. Details for each event appear on a Disclosure Reporting Page, or DRP, that accompanies the filing. A clean DRP section is what you hope to find; any entries deserve careful reading.
Filing and Update Terms
Advisers file electronically through the Investment Adviser Registration Depository, or IARD.15Securities and Exchange Commission. Electronic Filing for Investment Advisers on IARD
Every adviser must file an annual updating amendment within 90 days after the end of its fiscal year. Between annual updates, advisers must file additional amendments “promptly” whenever information in Parts 1A, 2A, or 2B becomes materially inaccurate. The instructions do not define a specific number of days for that requirement; “promptly” is the operative standard. For Part 3, Form CRS, the deadline is concrete: amendments must be filed within 30 days of any information becoming materially inaccurate.7Securities and Exchange Commission. Form ADV – General Instructions Changes that trigger an amendment include a shift in ownership, a significant change to the fee schedule, or a new disciplinary event.
Looking Up a Filing
Form ADV filings are publicly available through the Investment Adviser Public Disclosure database, known as IAPD, at adviserinfo.sec.gov. You can search by firm name or individual representative and view the current filing, registration status, employment history, and reported disciplinary events. The database is free.16Investor.gov. Investment Adviser Public Disclosure (IAPD)
Confirm the firm shows an active registration under “Registration/Reporting Status.” Then open the Part 2A brochure and read the sections on fees, conflicts of interest, and disciplinary information, using the vocabulary above to interpret what you see. Records for advisers that are no longer registered remain available on IAPD for ten years after the firm’s registration ends, so you can trace a firm’s history even if it has closed or merged.