Quick Answer
Investment advisers owe a fiduciary duty to disclose all material facts. Deliver the Form ADV Part 2A brochure before or at contract signing; state advisers may deliver at signing only if the client can terminate without penalty within 5 business days. The Securities and Exchange Commission marketing rule now allows testimonials with disclosure, but most states still ban them.
The whole unit on one sheet: disclosures, the brochure and its delivery timing, contracts, the marketing rule, and the guarantee ban the exam loves.
The One-Liners That Win Points
- Omitting a material fact is fraud, just as much as making a false statement. A material fact is anything a reasonable client would weigh before investing.
- Form ADV Part 2A is the client-facing brochure (services, fees, conflicts, disciplinary history); Part 2B is the supplement covering each individual investment adviser representative (IAR) who gives advice.
- Registration does not equal endorsement. An adviser may state the fact of registration but may never imply the Administrator approved, verified, or vouched for them or a security.
- Series 65 is a license, not a certification. Say "Series 65 licensed," never "Series 65 certified"; the same rule bars advertising "RIA" or "IAR" as if it were an earned designation. Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) are permitted because they are earned.
- No performance guarantees, ever. Guaranteeing a return, a break-even, or "you won't lose a dime" is prohibited, and "the client asked for it" is never a defense.
- A money-back guarantee on advisory fees is permitted: it covers service quality, not investment results.
- Assignment needs client consent. A change in majority ownership of the advisory firm counts as an assignment; a minority change needs only written notice.
- A signed waiver of client rights under the Uniform Securities Act (USA) or Investment Advisers Act of 1940 is void and unenforceable.
Numbers to Lock In
| Item | Value |
|---|---|
| Brochure delivery, state rule (Option 1) | at least 48 hours before signing |
| Brochure delivery, state rule (Option 2) | at signing, with a 5-business-day penalty-free termination right |
| Federal-covered adviser delivery | before or at signing (no 48-hour option, no 5-day right) |
| Annual Form ADV filing with regulators | within 90 days of fiscal year-end |
| Annual brochure delivery to existing clients | within 120 days of fiscal year-end |
| Broker-dealer fee schedule change notice | 30 days advance written notice |
| Compensated promoter written agreement trigger | more than $1,000 in a 12-month period |
| Performance advertising periods | 1, 5, and 10 years (or since inception) |
| Qualified-client test (either one) | $1.4 million assets under management OR more than $2.7 million net worth |
Memory Aid: The Six Hiring Questions
- Who are you? (qualifications) What will you do? (services) What does it cost? (compensation) What's in it for you? (conflicts) Who else are you connected to? (affiliations) Can you actually deliver? (financial condition). Six questions a reasonable client would ask before handing over money map to the required advisory disclosures.
Top Gotchas
- Brochure delivery is either/or, not both. Deliver 48 hours in advance OR at signing; the exam presents both as if both are required. The 5-business-day penalty-free withdrawal applies ONLY to the at-signing option.
- Two annual deadlines, not one. Filing with regulators is 90 days; delivering to existing clients is 120 days. March 31 (90 days from a December 31 year-end) is the decoy on client-delivery questions.
- State-registered advisers still ban testimonials in most states, even though the marketing rule now allows them federally with disclosure. This is the most tested distinction here.
- One-on-one communications are not advertisements, but a social media post or a mass email offering advisory services is.
- Net performance must sit beside gross with equal prominence; you cannot cherry-pick time periods.
- A break-even promise is still a performance guarantee. "You can't lose with this strategy" violates the rule.
One-Breath Recap
Investment advisers are fiduciaries who must disclose every material fact, and omission is fraud. The Form ADV Part 2A brochure goes to clients before or at signing; a state adviser delivering at signing must give a 5-business-day penalty-free termination right, while the 48-hour advance option needs none. File the annual amendment within 90 days of fiscal year-end and deliver the updated brochure within 120. Never guarantee performance, never let a signed waiver stand, and treat a majority-ownership change as an assignment needing consent. The marketing rule now permits testimonials with disclosure federally, but most states still forbid them, and registration is never an endorsement.
Need more than the recap? This is a condensed summary. If it is not enough, read the full Client Communication unit for the complete lesson.