Mich. Admin. Code R. 451.4.19 - Investment adviser brochure

Rule 4.19.

(1) Unless otherwise provided in this rule, an investment adviser that is registered, or required to be registered, pursuant to section 403 of the act, MCL 451.2403, shall, pursuant to the provisions of this subrule, furnish each advisory client and prospective advisory client with the following:

(a) A brochure which may be a copy of part 2A of its Form ADV or written documents containing the information required by part 2A of Form ADV; a copy of its part 2B brochure supplement for each individual providing investment advice and having direct contact with clients in this state, or exercising discretion over assets of clients in this state, even if no direct contact is involved; a copy of its part 2A appendix 1 wrap fee brochure if the investment adviser sponsors or participates in a wrap fee account; a summary of material changes, which may be included in part 2 of Form ADV or given as a separate document; and such other information as the administrator may require. If investment advice for a client is provided by more than 5 supervised persons, a part 2B brochure supplement for only the 5 supervised persons with the most significant responsibility day-to-day advice to the client must be provided.

(b) The brochure must comply with the language, organizational format, and filing requirements specified in the instructions to part 2 of Form ADV.

(2) An investment adviser, except as provided in subrule (5) of this rule, shall deliver the part 2A brochure and any brochure supplements required by this rule to a prospective advisory client before or at the time an investment advisory contract with that client is formed.

(3) An investment adviser, except as provided in subrule (5) of this rule, shall do either of the following:

(a) Deliver, within 120 days of the end of its fiscal year, a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes.

(b) Deliver, within 120 days of the end of its fiscal year, a free summary of material changes that includes an offer to provide a copy of the updated brochure and supplements and information on how the client may obtain a copy of the brochure and supplements. Advisers are not required to deliver a summary of material changes or a brochure to clients if no material changes have taken place since the last summary and brochure delivery.

(4) An investment adviser shall, within 30 days of disclosing an event in response to item 9 of Part 2A of Form ADV or Item 3 of Part 2B of Form ADV, deliver to clients the amended brochure or brochure supplement, as applicable, with a written statement describing the material facts relating to the amendment to Part 2A of Form ADV or Item 3 of Part 2B of Form ADV.

(5) Delivery of the brochure and related brochure supplements required by subrules (2)-(4) of this rule do not need to be made to any of the following:

(a) Clients who receive only impersonal advice and who pay less than $500.00 in fees per year.

(b) An investment company registered under the investment company act of 1940, 15 U.S.C. § 80(a) et seq.

(c) A business development company as defined in the investment company act of 1940, 15 U.S.C. § 80(a) et seq., and whose advisory contract meets the requirements of section 15c of that act, 15 U.S.C. § 80(a)-15c .

(6) Delivery of the brochure and related supplements may be made electronically if the investment adviser does all of the following:

(a) In the case of an initial delivery to a potential client, obtains verification that a readable copy of the brochure and supplements were received by the client. The verification required by this subrule may be in the client contract required by rule 451.4.26 or other documents signed by the client.

(b) In the case of other than initial deliveries, obtains each clients prior consent to provide the brochure and supplements electronically. The consent required by this subrule may be in the client contract required by rule 451.4.26 or other documents signed by the client.

(c) Prepares the electronically delivered brochure and supplements in the format prescribed in subrule (1) of this rule and instructions to part 2 of Form ADV.

(d) Delivers the brochure and supplements in a format that can be retained by the client in either electronic or paper form.

(e) Establishes procedures to supervise personnel transmitting the brochure and supplements and prevent violations of this rule.

(7) Nothing in this rule relieves any investment adviser from any obligation required under the act or a rule promulgated under the act or other federal or state law to disclose any information to its advisory clients or prospective advisory clients not specifically required by this rule.

Notes

Mich. Admin. Code R. 451.4.19

2019 MR 1, Eff. 7/3/2019