Form ADV Part 2B, commonly called the brochure supplement, is the SEC-required disclosure document that tells you about the specific person at an advisory firm who gives you investment advice or trades your account. Where the firm’s main brochure (Part 2A) describes the business, Part 2B is the professional background report on the human being handling your money: education, work history for the past five years, disciplinary events, outside business activities, extra compensation, and who supervises them.
What You Learn About Your Adviser
The supplement is organized around six items, each aimed at a different question you might reasonably ask before trusting someone with your portfolio.
Who They Are and How to Reach Them
The cover page lists the supervised person’s name, business address, and phone number, along with the firm’s contact information and the date the supplement was last updated. It also points you back to the firm’s Part 2A brochure and, for state-registered adviser representatives, notes that additional information is available at adviserinfo.sec.gov.1Securities and Exchange Commission. Form ADV Part 2
Education and Work History
Item 2 covers formal education after high school, the person’s age or year of birth, and the specific positions they held over the preceding five years. If they hold designations like CFA or CFP, the firm can list them, but it must also explain the minimum qualifications required to earn each one so you can judge how meaningful the credential is.1Securities and Exchange Commission. Form ADV Part 2
Disciplinary History
Item 3 is usually the section worth reading first. It requires disclosure of legal or regulatory events from the past ten years that would be relevant to your evaluation of the person’s integrity. The ten-year clock starts when a final order, judgment, or decree was entered, or when any right to appeal lapsed. Events resolved in the person’s favor or reversed do not need to be disclosed.1Securities and Exchange Commission. Form ADV Part 2
What has to be disclosed is broad. Criminal convictions or pending charges involving fraud, false statements, forgery, or investment-related offenses. Civil court orders limiting the person’s investment activities. SEC or state administrative proceedings that resulted in bars, suspensions, or civil penalties above $2,500. Self-regulatory organization proceedings with similar outcomes.1Securities and Exchange Commission. Form ADV Part 2
A disclosure in Item 3 is not automatically a reason to walk away. Read the specifics. A resolved complaint from eight years ago is a different situation than a pending fraud charge.
Other Business Activities
Item 4 exists to surface conflicts of interest. If the supervised person is also a broker-dealer representative, a futures commission merchant, or involved in another investment-related business, the firm must describe the relationship and spell out the conflicts. The concern is direct: if your adviser also earns commissions selling insurance or mutual funds, they have a financial incentive to steer you toward those products regardless of fit.1Securities and Exchange Commission. Form ADV Part 2
Non-investment activities also have to be disclosed if they take up a substantial share of the person’s time or income. The SEC treats anything over 10% as substantial. An adviser running a real estate business on the side has less bandwidth for your portfolio than you might otherwise assume.1Securities and Exchange Commission. Form ADV Part 2
Additional Compensation
Item 5 requires disclosure of any economic benefit the supervised person receives from someone other than you or the firm for providing advisory services. Sales awards, bonuses for bringing in new clients, and other incentive arrangements all belong here. The purpose is to expose motivations that may not line up with your interests.
Supervision
Item 6 does more than name a supervisor. The firm has to explain how it actually monitors the supervised person’s advice and give you the name, title, and phone number of the person responsible for that oversight. That is your direct line to management if something about your adviser’s conduct or recommendations concerns you.1Securities and Exchange Commission. Form ADV Part 2
Which People at the Firm Must Have One
Not every employee triggers a Part 2B. A brochure supplement is required for supervised persons who fall into one of two categories: those who formulate investment advice for a client and have direct contact with that client, or those who make discretionary investment decisions for the client, even without direct contact.2eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements
Discretionary authority is the important idea in that second bucket. Someone with discretion can buy or sell securities in your account without asking you first. Even if you never speak to that person, they are controlling trades, so their background is disclosable.
There is a practical cap for large teams. If more than five supervised persons provide advice to a single client, the firm only has to deliver supplements for the five people with the most significant day-to-day responsibility for that client’s account.2eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements
When You Should Receive It
You should receive the brochure supplement before or at the time the supervised person begins providing advisory services to you. The rule is written that way so you can review the person’s background before committing to the relationship, not after.2eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements
Disciplinary changes trigger a faster update. When a new disciplinary event occurs or an existing disclosure is materially revised, the firm must promptly deliver either an amended supplement or a written statement describing the change.2eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements “Promptly” is intentionally unforgiving; firms cannot hold bad news until the next annual cycle.
More broadly, the firm must amend the supplement whenever information in it becomes materially inaccurate, and it must review and update all Part 2B supplements as part of its annual updating amendment.3Securities and Exchange Commission. Form ADV General Instructions Unlike Part 2A, there is no fixed calendar deadline for a Part 2B update; the trigger is material inaccuracy.1Securities and Exchange Commission. Form ADV Part 2
When You Won’t Receive One
Three categories of clients are exempt from receiving supplements under SEC Rule 204-3(c):2eCFR. 17 CFR 275.204-3 – Delivery of Brochures and Brochure Supplements
- Clients who are not entitled to the firm’s Part 2A brochure in the first place, which primarily covers registered investment companies with qualifying advisory contracts and clients receiving impersonal advice for a fee under $500 per year.
- Clients who receive only impersonal investment advice, such as generic newsletters or model portfolios not tailored to their situation.
- Officers, directors, and employees of the firm who participate in its investment activities and have done so for at least 12 months, on the theory that they already know their colleagues.
How to Get a Copy and What to Check
SEC-registered firms are not required to file Part 2B publicly, so you usually cannot pull a supplement off a regulator’s website the way you can pull a firm’s Part 2A brochure.4IARD. Form ADV Part 2 IARD System Instructions The most direct route is to ask the firm’s compliance department. You are entitled to a current copy for any supervised person providing services to your account.
You can also verify much of the same information yourself. The SEC’s Investment Adviser Public Disclosure site at adviserinfo.sec.gov lets you look up individual investment adviser representatives and view their registration history, employment history, and any disclosed disciplinary events.5Securities and Exchange Commission. IAPD – Investment Adviser Public Disclosure If the person is also a registered broker-dealer representative, FINRA BrokerCheck results appear in the same search.
When you have the supplement in hand, the disciplinary and other business activities sections deserve the closest read. A clean Item 3 is what you want to see, and if there is a disclosure, look at the date, the nature of the event, and whether it was resolved. Item 4 is where you spot the conflicts that can quietly erode your returns, especially commission-based compensation on products the adviser recommends. If something in the supplement concerns you, the supervisor named in Item 6 is your first call. If that conversation does not resolve it, the SEC’s investor complaint process and your state securities regulator are the next steps.