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The required structure
Form ADV Part 2A has a prescribed table of contents — 18 items in a fixed order. The major sections include:
- Cover page and material changes summary.
- Advisory business and types of clients.
- Fees and compensation, with side-by-side fee schedules.
- Methods of analysis, investment strategies, and risk of loss.
- Disciplinary information.
- Other financial industry activities and affiliations.
- Code of Ethics, participation in client transactions, and personal trading.
- Brokerage practices and best execution.
- Review of accounts.
- Client referrals and other compensation.
- Custody.
- Investment discretion and voting client securities.
- Financial information.
When delivery is required
- Initial delivery — to every new client at or before entering into the advisory contract.
- Annual delivery — current clients receive either the updated brochure with a summary of material changes, or a notice of how to obtain it.
- Triggered delivery — when a material change happens, redelivery is generally required.
The plain-English requirement
The SEC explicitly requires the brochure to be written in plain English. Avoiding jargon, defining technical terms, using short sentences and active voice — these are not stylistic preferences but regulatory expectations. Examiners read the brochure as a layperson and flag passages that read like marketing or legal boilerplate.
Common deficiencies
- Brochure language inconsistent with the firm's actual practice — the most damaging finding.
- Material changes not summarized at the front, or "no material changes" claimed when changes occurred.
- Conflicts of interest disclosed at the highest level of generality without specifics.
- Fee schedules that don't match the actual fee arrangements.
How StratiFi thinks about the brochure
The brochure is the firm in plain English. Treating it as a living description of the practice — refreshed when something changes, not just at the annual updating amendment — is the difference between a brochure that holds up under examination and one that creates exposure. When the brochure, the recommendation log, and Form CRS all describe the same firm, the disclosure system works.
Frequently asked questions
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Who has to receive the brochure?
Every prospective and current client, with limited exceptions for certain wrap-fee programs and qualified institutional clients. Retail clients receive the brochure plus the relevant Part 2B brochure supplements. -
How often does the brochure get updated?
At minimum, annually as part of the firm's Form ADV updating amendment, within 90 days of fiscal year end. Material changes during the year may trigger interim updates. -
What happens if the brochure is wrong?
Material misstatements or omissions in the brochure can be cited as a violation in their own right and can also be evidence in fraud cases. The brochure is not a marketing document; it is a regulatory disclosure.