Sometimes regulatory changes that are meant to benefit investors end up taxing industry professionals, though this does not appear to be the case for the Securities and Exchange Commission's new format for investment company brochures.

Last Wednesday, the SEC decided to do away with fill-in-the-blank questions organized in a check-the-box setup. Form ADV, Part 2, describes a company's investment strategies, business practices and advisor qualifications. All investment advisory firms that manage $25 million or more in assets must file the form with the SEC. (Under the financial reform law, the threshold is to rise to $100 million, in most cases.)

The new filing requirement also asks advisers to present the information in a narrative way intended to make the information easier for the public to understand. There also is to be a table of contents so that customers can find the information they want more readily, said Karen Barr, general counsel for the Investment Advisers Association in Washington.

Brochure supplements must be delivered to new and prospective clients to give resume-like information for the firm's employees who will serve clients.

"In its current form … the format frequently does not correspond well to an adviser's business," SEC Chairman Mary L. Schapiro said in introductory remarks at the SEC's open meeting on Wednesday. "In some cases, the required disclosure may not describe the advisor's business or conflicts in a way that is truly accessible to the investor."

The new requirements actually modernize the entire process for advisers, Barr said, so that they will eventually be better satisfied by the format. Some initial costs and burdens come with the conversion, but once advisers get beyond that, they are expected to like the new process. Advisors will be able to create the information on a common word processing document, then convert it to a portable document format. They will be able to log on to the Investment Adviser Registration Depository, the SEC's electronic filing system, and attach the form to their filing.

Content is to include descriptions of the advisory business, such as the types of services offered; compensation practices; disclosures of performance-based fees and side-by-side management, methods of analysis, investment strategies and risk of loss; disciplinary information; codes of ethics and their brokerage practices.

In a practical sense, though, advisors had already been providing that information, Barr said. "When advisers wanted to make disclosures about items that were not requested they did not fit right, so they were put in random places," Barr said. "Now advisers can make the disclosures in a coherent fashion."

"It is something that has been long coming, and we look forward to the improvement of disclosure," said Paul D. Glenn, the IAA's special counsel.

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