Series 66: Disclosure

Taken from our Series 66 Online Guide

Disclosure

The cornerstone of good and ethical communication with clients is the concept of disclosure, or revealing what a client would need to know to make an educated decision about your services or about an investment you suggest. That doesn’t mean you need to reveal every single fact about your life and career or every tidbit of information ever generated about a potential investment, but just those considered material facts. That means that you need to share anything that a reasonable person would want or would need to know as a part of the decision-making process.

As part of the disclosure process, it is crucial that you don’t misrepresent or omit any material facts. Misrepresentation means that a professional doesn’t accurately describe or communicate an aspect of her qualifications, of her services, or of an investment. Omitting means that a professional just flat out skips over even mentioning something that a reasonable person would want to know.

Recall that under the Investment Advisers Act of 1940, all SEC registered investment advisers are required to provide a brochure describing the information within Part 2 of the Form ADV. This should be provided at least 48 hours prior to an advisory contract being signed, or the client will have five business days to terminate the contract without penalty. At the very least, the brochure is required to be delivered before or at the time that an advisory contract is signed. This is called the brochure rule, and it requires advisers to describe the types of services they provide, their fee structures, any conflicts of interest, any disciplinary actions against the firm or any of its IARs, and the educational and business background of its management and key personnel. The rule also requires investment advisers to provide an updated brochure to clients promptly if there are any material changes made to the brochure. They must also deliver the brochure to clients each year within

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