Why disclosure looks different when viewed across the market
Annual Form ADV amendments are in. For most registered advisers, the brochure is updated, the filing is done, and attention has already moved on. But your disclosure hasn’t stopped being read. Somewhere it is already being evaluated against a peer set. The question is whether you have done that analysis yourself.
(Note: This piece discusses Form ADV Part 2 benchmarking. Exempt reporting advisers that file only Part 1 may find the regulatory themes here relevant, but the benchmarking exercise will not be applicable to them.)
The blind spot
Most firms do not have a clear view of where their disclosures sit relative to the market. Outside counsel and compliance consultants may consider peer filings as part of the drafting process, but it is rarely structured as a systematic comparison across a defined peer set. Reviews tend to be episodic, triggered by an examination finding or a periodic refresh, rather than ongoing. As a result, even well-advised firms may not have a clear picture of how their disclosures align, in substance and specificity, with current market practice.
That gap matters more than it used to. What counts as adequate disclosure is not a fixed standard; it is being shaped, incrementally but continuously, by what peers are actually saying. A disclosure that read as complete two years ago may now look sparse by comparison, and one that reads as thorough in isolation can look quite different placed alongside a relevant peer set.
Disclosure as a comparable dataset
Unlike limited partnership agreements (LPAs) and private placement memorandums (PPMs), which are not generally available, Form ADV brochures are public. That makes them well suited for benchmarking. A structured comparison – breaking peer filings into comparable components and assessing both what is disclosed and how – makes it easier to identify which differences matter. Some reflect evolving regulatory focus; others reflect a broader market shift toward more specific and more current disclosure. With most registered advisers having just filed their annual amendments as part of the March cycle, the current moment offers a relatively clean, comparable dataset.
Where to focus the analysis
Certain areas are particularly worth examining when disclosures are reviewed this way.
- Post-commitment period fee mechanics are worth examining closely, particularly how management fee bases are constructed and reduced over time, including what is capitalized into invested capital and what operates to reduce the base.
- Arrangements involving operating partners, venture partners, value-add partners and similar roles warrant close attention. The Securities and Exchange Commission (SEC) has focused on whether these arrangements constitute expense shifting (i.e., whether costs that arguably should be borne by the adviser are instead being passed to the fund). A related question is how “market rate” is being established for these services, and whether the basis for that determination is transparent.
- Net asset value (NAV) credit facilities are an area where use and disclosure practice is still developing. For firms that use them, it is worth asking whether relevant disclosure addresses how these facilities differ from subscription lines and the distinct conflicts they present.
- Continuation vehicles and GP-led secondaries continue to be an area of SEC focus. Disclosures around the conflicts inherent in these transactions, including the adviser’s role in setting the valuation at which assets transfer, the potential for reset economics and any information asymmetry, are worth reviewing.
- Valuation-related conflicts are worth examining wherever advisers exercise discretion over determinations that affect their own economics. The Insight Venture enforcement action is a useful reference point. The SEC stated that the adviser had applied an impairment standard in a way that was narrower and more subjective than investors understood, and that the resulting conflict had not been adequately surfaced.
- AI disclosure is an emerging variable. Whether advisers are disclosing their use of AI in investment or operational processes is now an identified area of regulatory attention, and it is an area where market practice is still developing.
Note on methodology
Conducting this type of comparison well requires legal judgment, not just data. Some differences between peer disclosures are stylistic. Others go directly to how an adviser is describing core economic arrangements and conflicts of interest – and distinguishing between those two categories is where the analysis becomes meaningful.
It is also worth saying directly: Length is not a proxy for quality. Some of the most effective brochures are not necessarily the longer ones. A disclosure that describes the adviser’s actual business and conflicts with specificity and clarity is doing its job, whatever the page count. The goal of a benchmarking exercise is not to identify what is missing so it can be added; it is to understand whether what is there is accurate, current and sufficiently specific to be meaningful. That is a different exercise, and it sometimes concludes that a shorter, cleaner disclosure is doing its job better than a longer one.
The objective is not uniformity, and it is not comprehensiveness for its own sake. The value of the exercise is understanding clearly where and why your disclosures differ from market practice, and whether those differences reflect deliberate choices or gaps that only become visible in context. That is the view you do not get from your own brochure. It is also a good starting point for a conversation. We are glad to have it.
The authors
