The SEC proposed amendments to Part 2 of Form ADV on February 13 which would require advisors to provide a plain English narrative brochure to clients detailing information about the advisor’s business practices, including the types of advisory services they provide, fees they charge, and the risks that clients can anticipate.

If adopted, the SEC says more than 10,000 investment advisors registered with the SEC “would be required to provide clear, current, and meaningful disclosure in narrative form to nearly 20 million advisory clients.” Most advisors currently use a check-the-box, fill-in-the-blank form for their brochures.

The narrative also would disclose the disciplinary history of an investment advisor including any violation of the securities laws, as well as conflicts of interest such as the use of affiliates to execute transactions, the use of client brokerage to obtain “soft dollars benefits,” and the advisor’s interests in certain transactions.

The SEC says the proposal also would address developing areas of concern, including “conflicts of interest arising from the side-by-side management of clients who pay performance fees (such as hedge funds) and those who do not; conflicts of interest arising from an advisor’s receipt of compensation from issuers of financial products the adviser recommends to clients; and qualifications of a firm’s employees who give advice to clients.”

Public comment on the proposed amendments should be received by the Commission no later than 60 days after their publication in the Federal Register.