Essential Compliance Tips for Navigating the 2025 Form ADV Update: Your Ultimate Preparation Guide

Investment advisers are currently focused on updating their Form ADV as the March 31, 2025, deadline approaches. This crucial filing is essential for maintaining compliance with regulatory requirements, and careful preparation is necessary to ensure a smooth process. Here, we will outline key steps and considerations for advisers as they navigate the Form ADV 2025 update.

Preparation Steps for Form ADV 2025

Updating Form ADV involves several important steps that advisers must follow:

• Funding the IARD Account: Ensure that your Investment Adviser Registration Depository (IARD) account is adequately funded well before the deadline. The SEC requires sufficient funds for filing, and high traffic volumes near the deadline can cause delays. It’s advisable to deposit funds at least one week in advance.
• Understanding Fee Structures: The fees for filing depend on the adviser’s regulatory assets under management (RAUM), ranging between $40 to $225 based on different registration categories.
• State Notice Filings: Review new client relationships to determine if they trigger additional state-level filing requirements. Updating IARD accounts to reflect necessary state filing fees is crucial.

Consistency Across Form ADV Sections

It is vital for advisers to maintain consistency across different sections of Form ADV. Key areas to review include:

• Parts 1A, 2A, 2B, and 3 (Form CRS): Ensure that all information regarding services, fees, conflicts of interest, and disciplinary history is accurate and up to date.
• Outdated Disclosures: Remove any references to irrelevant risks, such as those related to COVID-19, to avoid confusion.

Compliance Checks and Reporting

The SEC regularly audits advisers’ Form ADV documentation. To ensure compliance, advisers should:

• Generate reports validating key data, including client numbers and RAUM classifications.
• Document the criteria used for client classification and the methodologies for filtering or interpreting financial data.

Moreover, any material changes since the last annual update must be reported, specifically in Item 2 of Form ADV Part 2A.

Key Focus Areas for 2025

As part of their ongoing compliance efforts, the SEC has outlined several focus areas for 2025, including:

• Marketing Compliance: The SEC has identified common errors in Form ADV disclosures related to marketing, especially concerning third-party ratings and hypothetical performance claims.
• Artificial Intelligence Risks: Firms using AI-driven investment tools must assess the risks associated with AI, particularly in promoting investments that may favor firms over clients.
• Outsourcing Risks: Compliance functions involving third-party service providers should be monitored to ensure they meet regulatory standards.

For a comprehensive understanding of these focus areas and further guidance, you can read the complete ACA Group’s guide.

In summary, by following these guidelines and maintaining thorough preparation, investment advisers can successfully navigate the Form ADV 2025 update, ensuring compliance and avoiding potential pitfalls.