TAKING THE SERIES 66 EXAM? THEN STUDY AND KNOW PART 2B OF FORM ADV, KNOWN AS THE BROCHURE SUPPLEMENT
Did you know that the SEC requires that an investment adviser must provide a "Brochure Supplement" to every client who receives advisory information and advisory services from one of the adviser's supervised employees? This requirement is found in Part 2B of Form ADV.
The investment adviser or advisory firm must provide a Brochure Supplement for each supervised individual (1) who develops or formulates investment advice for a client and who has direct contact with that client; or (2) who makes investment decisions for that client on a discretionary basis, even if this employee has no direct contact with the client.
Here's how the SEC describes the Brochure Supplement, which is actually Part 2B of Form ADV:
The brochure supplements contain information about the educational background, business experience, and any disciplinary history of the specific individuals who provide advisory services to the client. Brochure supplements may be separate documents or incorporated into the firm brochure. An investment adviser must deliver a brochure supplement that provides information about an employee either before or at the time that the employee begins to provide investment advice to a client. The investment adviser must deliver promptly to clients updated information regarding disciplinary events if it is updating a brochure supplement to add a new event or to change material information about a disciplinary event.
(https://www.sec.gov/resources-investors/investor-alerts-bulletins/investment-adviser-brochure)
The SEC goes on to list the items that Part 2B must contain:
Educational background and business experience – The brochure supplement must describe the supervised individual’s formal education after high school and his or her business experience for the past five years.
Disciplinary information – The brochure supplement must disclose any legal or disciplinary event that is material, and include certain disciplinary events that are presumed to be material to such an evaluation if they occurred during the last 10 years.
Other business activities – The brochure supplement must describe the supervised individual’s other business activities and any material conflicts of interest that such participation may create. It must also include information about any compensation – bonus or non-cash – that the supervised individual receives based on the sales of securities or other investment products, as well as an explanation of the incentives this type of compensation creates.
Additional compensation – The brochure supplement must describe arrangements in which somebody other than the client provides the supervised individual an economic benefit, such as a sales award or other prize, for providing advisory services.
Supervision – An investment adviser must explain how it supervises the supervised individual, including how it monitors the advice provided to the client by the supervised individual and must include the name, title, and telephone number of the individual’s supervisor.
If investment advice is provided by a team comprised of more than five supervised individuals, brochure supplements need only be provided for the five supervised individuals with the most significant responsibility for the day-to-day advice provided to the client.
Brochure supplements are not filed with the SEC. However, the public can obtain information about advisory personnel, including disciplinary information, through the IAPD system at http://www.adviserinfo.sec.gov.
(https://www.sec.gov/resources-investors/investor-alerts-bulletins/investment-adviser-brochure)
Bob Eder discusses Part 2B of Form ADV (the Brochure Supplement) and required Disclosures to Clients in his Study for the Series 66 Exam.
Here is the link to NASAA's Test Specifications for the Series 66 Exam. See Section IV (G) (5) (1-5) covering Communications with Clients and Required Disclosures.
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