Pennsylvania Code & Bulletin
COMMONWEALTH OF PENNSYLVANIA

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10 Pa. Code § 404.011. Investment adviser brochure disclosure.

§ 404.011. Investment adviser brochure disclosure.

 (a)  An investment adviser’s failure to provide an advisory client or prospective advisory client with the disclosure required under this section shall constitute a fraudulent, deceptive or manipulative act, practice or course of business, within the meaning of section 404 of the act (70 P.S. §  1-404).

 (b)  An investment adviser registered under section 301 of the act (70 P.S. §  1-301) shall offer and deliver to each client and prospective client a current firm brochure and one or more supplements as required under this section which must contain the information required under Part 2 of Form ADV (17 CFR 279.1) (relating to Form ADV, for application for registration of investment adviser and for amendments to such registration statement).

 (c)  An investment adviser shall deliver to each client and prospective client all of the following:

   (1)  A current firm brochure.

   (2)  The current brochure supplements for each investment adviser representative who will provide advisory services to a client.

 (d)  The firm brochure and one or more supplements required under this section shall be delivered in compliance with one of the following:

   (1)  Not less than 48 hours before entering into any investment advisory contract with the client or prospective client.

   (2)  At the time of entering into a contract, if the advisory client has a right to end the contract without penalty within 5 business days after entering into the contract.

 (e)  An investment adviser shall:

   (1)  Deliver or offer in writing to deliver to each of its clients the current brochure and any current brochure supplements required under subsection (b) without charge at least once a year.

   (2)  Send to a client that accepts a written offer the current brochure and supplements within 7 days after the investment adviser is notified of the acceptance.

 (f)  If, as an investment adviser, the adviser is the general partner of a limited partnership, the manager of a limited liability company, or the trustee of a trust, then for purposes of this section the investment adviser shall treat each of the partnership’s limited partners, the company’s members or the trust’s beneficial owners as a client. For the purposes of this section, a limited liability partnership or limited liability limited partnership is a “limited partnership.”

 (g)  If an investment adviser gives substantially different types of investment advisory services to different clients, the investment adviser may do the following:

   (1)  Provide the clients with different brochures, so long as each client receives all applicable information about services and fees.

   (2)  Omit from the brochure delivered to a client any information required under Part 2A of Form ADV if the information applies only to a type of investment advisory service or fee which is not given or charged, or proposed to be given or charged, to that client or prospective client.

 (h)  Except as provided in paragraph (1), if the investment adviser is a sponsor of a wrap fee program, the brochure required to be delivered by subsection (b) to a client or prospective client of the wrap fee program must be a wrap fee brochure containing all the information required under Form ADV.

   (1)  The investment adviser does not have to offer or deliver a wrap fee brochure if another sponsor of the wrap fee program offers or delivers to the client or prospective client of the wrap fee program a wrap fee program brochure containing all the information specified in Part 2A, Appendix 1 to Form ADV.

   (2)  A wrap fee brochure does not take the place of any brochure supplements that the investment adviser is required to deliver under this section.

   (3)  Additional information in a wrap fee brochure must be limited to information applicable to wrap fee programs that the investment adviser sponsors.

     (i)   In accordance with Part 2 of Form ADV, if information contained in the brochure or brochure supplement becomes materially inaccurate, the investment adviser shall:

   (1)  Amend its brochure and any brochure supplement.

   (2)  Deliver the amendments to clients promptly.

   (3)  Promptly file the amendments with the Department or with IARD.

 (j)  Delivering a brochure or supplement in compliance with this section does not relieve the investment adviser of any other disclosure obligations which the investment adviser may have to its clients or prospective clients under the act or this title.

 (k)  The delivery requirement set forth in subsection (d) does not apply to the extension or renewal of an investment advisory contract without material changes of the contract which is in effect immediately prior to the extension or renewal.

Authority

   The provisions of this §  404.011 issued under sections 404(a) and 609(a) of the Pennsylvania Securities Act of 1972 (70 P.S. § §  1-404(a) and 1-609(a)); amended under section 202.C of the Department of Banking and Securities Code (71 P.S. §  733-202.C); section 609(a) of the Pennsylvania Securities Act of 1972 (70 P.S. §  1-609(a)); and section 9(b) of the Takeover Disclosure Law (70 P.S. §  79(b)).

Source

   The provisions of this §  404.011 adopted September 1, 2000, effective September 2, 2000, 30 Pa.B. 4551; transferred and renumbered from 64 Pa. Code §  404.011, December 14, 2012, effective December 15, 2012, 42 Pa.B. 7533; amended January 12, 2018, effective January 13, 2018, 48 Pa.B. 389. Immediately preceding text appears at serial pages (364787) to (364789).

Cross References

   This section cited in 10 Pa. Code §  102.021 (relating to definitions); 10 Pa. Code §  304.012 (relating to investment adviser required records); and 10 Pa. Code §  404.012 (relating to cash payment for client solicitation).



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