Compliance on the Charles: Boston Regional Summit

June 14- | The Harvard Club of Boston

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Electronic Delivery of Client Information

The SEC permits electronic delivery of reports and information such as the ADV and Privacy Notice. The below are the requirements that must be met for electronic delivery of client information:

  • Investment advisers must obtain consent from the client prior to electronic delivery.
  • Electronic delivery of required reports and information must be provided in a timely fashion with adequate notice to the client.
  • The information available in the electronic format must be comparable to the information that is in paper format.
  • Investment Advisors must have reason to believe that the electronic delivery of required reports and other information, will result in good delivery to the client. Examples of evidence of electronic delivery are: email return receipt, confirmation of accessing or viewing the reports or documents.

ADV Part 2A Delivery

Pursuant to applicable state and federal laws, advisers are required to deliver a brochure (ADV Part 2A) to each client or prospective client:

  • Before or at the time you enter into an investment advisory contract with that client and,
  • If there were material changes in your brochure since your last annual updating amendment, advisers must provide within 120 days of the end of their fiscal year either:
  • A current full brochure, or
  • A summary of the material changes to the brochure as described in Item 2 of Form ADV, Part 2A with an offer to provide the full brochure.
  • If there is a change in the disciplinary information disclosed (Part 2A Item 9), an updated brochure or separate document describing the material facts related to the event.

If there were no material changes, Advisers are typically not required to annually deliver the full brochure or summary of the material changes.  State-registered advisers should review their applicable state requirements to determine whether an annual offer is required irrespective off any material changes.

Privacy Notice

Pursuant to the requirements of the Gramm-Leach-Bliley Act (the “GLBA”) and guidelines established by the SEC regarding the Privacy of Consumer Financial Information (Regulation S-P), the Privacy Notice Delivery includes:

  • Initial Privacy Notice– As regulations require, all new clients must receive an initial Privacy Notice at the time the client relationship is established (i.e., upon execution of the agreement for services).
  • Annual Privacy Notice– All state registered investment advisers must deliver a copy of their Privacy Notice to existing clients on an annual basis and maintain evidence of the delivery in their books and records. Note that for SEC registered advisers, you only need to deliver an annual privacy notice if your privacy policy has changed since the initial delivery to your clients.

Best Practices to Obtain Client Consent

A best practice for obtaining client consent for electronic delivery is to include a specific provision in the client Agreements. Investment Advisers can also utilize a separate form signed by the client. The SEC has deemed client consent verbally or via telephone acceptable as long as a record of that consent is retained. This record should contain as much detail as any written consent.

Andrea Penn