Common Form ADV filing errors, which can trigger SEC penalties, include inconsistent data between Part 1 and Part 2, inaccurate calculation of regulatory assets under management (AUM), failure to update material changes promptly (within 30 days), and neglecting to disclose conflicts of interest or third-party ratings.
RQC Group
RQC Group
 +3
Common Form ADV Filing Pitfalls
Inconsistencies Across Parts: Data in Form ADV Part 1 (filed on IARD) often conflicts with the Part 2A narrative brochure or the Part 3 (Form CRS) relationship summary.
AUM Calculation Errors: Miscalculating "regulatory assets under management" by including assets under advisement (not under continuous management) is a frequent error.
Failure to Update Material Changes: Failing to report material changes to the business, such as changes in ownership, key personnel, or physical location, in a timely manner.
Vague or Misleading Disclosures: Using terms like "may" to describe services instead of definitive language, or failing to properly describe conflicts of interest, particularly regarding compensation.
Marketing & AI Risks: Failure to accurately disclose the use of third-party ratings, performance results, or risks associated with AI-driven investment tools.
Fee Schedule Misalignment: The fee schedule listed in Part 2A does not match the actual investment advisory agreements or contracts.
Discretionary Authority Errors: Misreporting whether the adviser has discretionary authority over client accounts.
Altruist
Altruist
 +5
Tips for Avoiding Errors
Thorough Review: Ensure all parts of the ADV, including Part 2B (Brochure Supplement), are consistent with one another.
Timely Updates: Review and update the ADV at least annually (within 90 days of fiscal year-end) and promptly upon any material change.
Accuracy in AUM: Follow SEC instructions precisely when calculating AUM to avoid overstating or understating assets.
Document Retention: Maintain thorough documentation to support all claims made in the ADV, as the SEC may request proof.

Going Independent: 6 Common Mistakes Financial Advisors Make on Their Form ADV
Errors on your Form ADV can lead to headaches. Here are common mistakes to avoid.

Every new RIA must submit a Form ADV filing before getting started. Working with a compliance consultant to help navigate the registration process is recommended. However, let’s look at 6 common mistakes financial advisors make on their Form ADV that you should avoid.

Year over year, one of the top deficiencies across RIA compliance categories is registration. More specifically, regulatory issues surrounding Form ADV filings. In fact, according to NASAA’s report on Investment Adviser Coordinated Exams, in 2019, nearly 50% of all regulatory exams of RIAs in the US noted at least one registration deficiency.

Reviewing the 1,078 examinations in the NASAA report, the most common pitfalls advisors stumble into on their ADV are:

Inconsistencies between Part 1 and Part 2 (and now Part 3)
Description of services provided
Fee matching
Business descriptions
Conflicts of interest
AUM
Let’s examine each one so we can focus on how to avoid common mistakes to steer clear of regulatory hot water.

1. Inconsistencies between Part 1, Part 2, & Part 3 of the ADV
Since mistakes in Parts 1, 2, and 3 of the ADV are among the easiest to make and quickest to spot by a regulator, let’s start here. This one may feel like a no-brainer, but it’s easy to miss the basics. Part 1 is a form that requires submission online, whereas Part 2 is a plain English brochure. RIAs are required to produce the same information in different formats and keep those updated over the life of your registration. This makes it easy to overlook making updates when circumstances change. Add the new Form CRS (i.e., Part 3), and there’s one more document to keep track of to ensure consistency across all disclosures.

Paying close attention to fees, services provided, description of your business, portfolio management techniques, and the risks to your investment strategy as you update each document will help reduce the likelihood of missing a revision.

2. Description of services provided
Pay attention to the words you use. The SEC strongly disfavors the use of the term “may” when describing what you do – and how you do it – for your clients. Use declarative statements to describe your services – and more importantly, do what you say. Many compliance consultants might be tempted to hedge these descriptions when helping you draft your Part 2 and Part 3 disclosures. This, unfortunately, has the opposite effect and leads to more significant compliance issues. It’s best to define your services, state them clearly, and ensure you manage your practice per your Form ADV.

3. Fee structures for your RIA
In 2019, 43% of fee-related examination issues involved advisors charging fees that did not match their Form ADV. Here’s what typically happens: you draft your Form ADV with a fee schedule in mind, and somewhere down the road, you charge a client something different. Most likely, there was never malicious intent or an attempt to defraud your clients — it was simply an oversight. But these oversights are rarely forgivable by regulatory examiners.

Ensuring you’re reconciling your actual fee-billing practice to your Form ADV disclosures and IMA on a semi-annual (or at most annual) basis will help keep you consistent.

4. RIA business descriptions
Stick with plain English. The rule of thumb for any regulatory interaction is that your examiner should understand everything you’re attempting to explain after their first read of the document. If they don’t, they’ll likely have a presumption that they need to dig into what you’re doing.

An easy barometer for this is to give your Form ADV to a few random family members and friends that don’t know much about finance. If they can explain your business after reading your Form ADV, you’re probably in good shape.

5. Conflicts of interest
This one is plain and simple: If there’s even the slightest chance you could experience some benefit from anything related to your clients, disclose it. There’s nothing but downside risk if you fail to disclose a conflict of interest, no matter how immaterial. Your compliance consultant should be able to help craft the language appropriately.

6. AUM
Get your AUM number right. Understating to avoid SEC registration and overstating to create a false sense of significance is equally bad. Ensuring your AUM and RAUM calculations are accurate, defensible, and objectively measurable while keeping both up to date is an easy way to make this a non-issue for an examiner.

Keep in mind this list is not exhaustive. A good compliance consultant will help you navigate all parts of the Form ADV. Paying close attention to these issues is a great way to learn from financial advisors’ most common mistakes on their Form ADV.

Form ADV Mistakes Can Put Advisors in Hot Water With Regulators. How to Avoid Them.
Many advisors misconstrue assets under management or don’t stick to the practices they disclose, causing potential regulatory headaches.

There are a lot of things as a financial advisor you don’t want to get wrong, and Form ADV—the registration document advisors submit to the Securities and Exchange Commission and state securities regulators—is one of them.

Avoid the Most Common Mistakes on ADV Filings – Not Allocating Enough Time and Not Including the Business
Investment Advisors must file their annual ADVs no later than 90 days after the end of the firm’s fiscal year; for most firms this means March 30th. It’s hard to find people that like to complete the ADV, and procrastination is a significant factor in reducing the quality of filings. The ADV is an easy thing to set aside for another day when other urgent matters arise, but it is also an extremely important task, and you should give it the time it deserves.

The General Instruction for Part 2 of Form ADV is a good reference that includes:

“Under federal and state law, you are a fiduciary and must make full disclosure to your clients of all material facts relating to the advisory relationship. As a fiduciary, you also must seek to avoid conflicts of interest with your clients, and, at a minimum, make full disclosure of all material conflicts of interest between you and your clients that could affect the advisory relationship. This obligation requires that you provide the client with sufficiently specific facts so that the client is able to understand the conflicts of interest you have and the business practices in which you engage, and can give informed consent to such conflicts or practices or reject them. To satisfy this obligation, you therefore may have to disclose to clients information not specifically required by Part 2 of Form ADV or in more detail than the brochure items might otherwise require. You may disclose this additional information to clients in your brochure or by some other means.”

Helpful Hints:
Use Plain English. At Oyster we believe that you fulfill the requirements with plain English (just be blunt) disclosures.

Get input from your portfolio managers, traders, operations and sales teams to make sure that the disclosures “are true and do not omit any material facts.”

Schedule time to complete the task, or get some help to make sure that your disclosures stand up to scrutiny.

When in doubt, include it. A summary of material changes must be sent to each client, as well as an offer to provide the full ADV2A. If you have any doubt as to whether something could be perceived material, put it in there. Even well-crafted ADVs can get picked apart by regulators and litigators, and it is expensive to go through the process to prove you were right.

Limit the use of the term “may” and instead use “will”. Even when “may” is the accurate term, it can lead to findings in an exam or worse.

Make sure you can document your Assets Under Management (AUM) calculations and be sure that they are consistent between Forms ADV1 and ADV2A. “Clients” may be counted as either individual accounts or as households, but the way clients are counted must be consistent across all filings.

Staying on Top of Compliance
With Form ADV
The Dos and Don’ts of Filing Form ADV


Form ADV, a document required by the SEC that publicizes important information about an RIA’s business practices, conflicts of interests and fees, is intended to help investors make informed decisions about whether to engage an advisor’s services.

When filling out Form ADV, RIAs must disclose:

Business practices
Services offered
Fees charged
Total assets under management
Number of accounts
Number of employees serving in an advisory function
Percentages of each client type (individuals vs HNW individuals)
Advisory activities (portfolio management, financial planning, etc)
Other business activities  (Insurance broker, broker-dealer, etc)
Educational backgrounds
Professional backgrounds
Potential conflicts of interest
While the Form ADV requirement is well intentioned, filling it out accurately and thoroughly can be challenging for advisors. For one thing, it can be difficult to understand exactly what needs to be disclosed. Advisors may be working with incomplete or outdated information, resulting in inaccuracies on the form, and of course, simple human error and unintentional oversight can also cause problems with the form.

Unfortunately, these errors can be costly. Failure to fill out Form ADV completely and accurately can result in penalties, fines, and even legal action from the SEC, as well as cause reputational damage and tarnish credibility.

Here, we’ve outlined some of the most common pitfalls we see RIAs run into while completing Form ADV, and offer guidance for ensuring compliance when submitting the form.

Common missteps to avoid
1. Having inconsistencies between Part 1, Part 2 and Part 3

Form ADV is broken down into three parts that detail an RIA’s personal information.

Part 1 requests high-level information about an RIA (e.g., business practices, the persons who own and control them and the persons who provide investment advice on the RIA’s behalf). It also contains several schedules and questions required by state securities authorities an RIA may have to complete depending on their credentials.

Part 2 requires RIAs to create narrative brochures containing information about their advisory firm as well as brochure supplements containing information about certain supervised persons.

Part 3 requires RIAs to create a relationship summary containing information for retail investors.

While some of the requested information may not be applicable to your firm, what’s most important is that you review Form ADV in its entirety and be consistent in the information you provide across all three parts of the form. Doing this will help you stay within regulations and help your clients gain a holistic view of your services.

2. Describing your services inaccurately

Succinctness is key when describing your services. The SEC pays close attention to make sure you actually provide the services you say you do. Avoid using passive voice and be as thorough as possible when detailing the services you offer.

3. Charging inconsistent fees

For the sake of transparency, it is also important that the fees on Form ADV match the fees that you charge clients. While it may be an honest mistake if you charge outside of the fee schedule you slotted on Form ADV, the SEC is notoriously unforgiving of these types of mistakes and will fine you for small and large violations alike.

4. Describing your business inaccurately

Don’t overcomplicate things — use your natural writing voice to clearly describe your business and avoid using jargon and hypothetical language in the descriptions. Remember, whoever processes your Form ADV will likely be interacting with your business for the first time, so provide enough detail so they understand your business without getting lost in irrelevant details.

5. Failing to report conflicts of interest

This one may sound obvious, but disclose any type of conflict of interest you could potentially have with your client. It doesn’t matter how harmless or innocuous the situation may be, if you think there is any potential for conflicting interests, report it on your Form ADV.

6. Miscalculating your AUM

Accurately calculate your assets under management (AUM) by including the securities portfolios for which you provide continuous supervisory or management services as of the date of filing Form ADV. Overreporting or underreporting your AUM for any reason advantageous to your firm can lead to a hefty fine and damage your firm’s reputation.

Best practices

The most important thing to remember when filling out Form ADV is to approach the process with confidence and candidness — combatting confusion with clarity. Be purposeful with the language you use and make sure what you write is an accurate representation of your business and credentials.

Avoiding these pitfalls and using this direction will help you stay in line with the SEC. For more information on Form ADV and how to file it, please visit the SEC’s instructions document.

How to prepare for the 2025 Form ADV update: key compliance tips

Investment advisers with a 31 December fiscal year-end are in the midst of updating their Form ADV, with a deadline set for 31 March 2025.

Ensuring a smooth filing process requires careful preparation, ACA Group recently offered a guide for firms in the process of preparing their Form ADV 2025 update.

One of the most crucial steps is ensuring that the IARD (Investment Adviser Registration Depository) account is funded well before the deadline. The SEC does not accept Form ADV filings for accounts without sufficient funds, and high system traffic near the deadline could lead to delays. Advisers should deposit funds at least a week in advance to avoid potential submission issues. Fee structures depend on an adviser’s regulatory assets under management (RAUM), with costs ranging from $40 to $225 for different registration categories.

Another key aspect is state notice filings. The Form ADV annual update provides an opportunity to assess whether new client relationships trigger additional state-level filing requirements. It is critical to update IARD accounts to reflect the necessary state filing fees, rather than waiting for the next annual state filing renewal. The IARD website provides guidance on state filing obligations.

Ensuring consistency across Form ADV sections is essential. Advisers must cross-check Parts 1A, 2A, 2B, and 3 (Form CRS) to confirm that information about services, fees, conflicts of interest, and disciplinary history is up to date. Any outdated disclosures—such as references to COVID-19 risks that no longer apply—should be removed.

The SEC routinely examines advisers’ Form ADV documentation during regulatory audits. To ensure compliance, advisers should generate reports validating key data, including client numbers, asset classifications, and RAUM calculations. Firms should also document the criteria used to classify clients and describe the methodologies applied to filter or interpret financial data.

Material changes must be reported, even if other-than-annual amendments have already been submitted. Item 2 of Form ADV Part 2A should contain a summary of all material changes since the last annual update.

As part of its guide, ACA also highlighted current SEC focus areas.

The SEC has highlighted several focus areas for 2025, particularly in relation to marketing, artificial intelligence (AI), outsourcing risks, and conflicts of interest. The 2024 Risk Alert on Marketing Rule compliance identified frequent errors in Form ADV disclosures. These include failures to accurately state the presence of third-party ratings, performance results, or hypothetical performance claims in adviser marketing materials.

Firms that utilise AI-driven investment tools must carefully assess the materiality of AI-related risks. The SEC has raised concerns that AI could be used to promote investments that benefit firms over clients, encourage frequent trading, or steer clients towards complex financial products that do not align with their risk profiles.

Digital engagement practices, including online advisory services and automated recommendations, have also come under SEC scrutiny.

The SEC’s 2025 Priorities report also identifies risks related to outsourcing, particularly when third-party service providers play a critical role in compliance functions. Advisers should ensure that vendors meet competency, cybersecurity, and regulatory standards.

Some of the other areas the guide delves into include conflicts relating to assets, non-standard fee arrangements, dual capacity advisers, advisers to private funds, cybersecurity and more.