Regulation — RIA-specific
SEC Form ADV Part 2A — AI disclosure (2026 amendment)
The 2026 Form ADV amendment adds specificity to how RIAs describe AI, algorithmic, and predictive-analytics tools used in advisory services. Advice about the client, marketing about the firm, and portfolio-recommendation tooling all now need brochure-level treatment. Misstatements land on Advisers Act Section 207.
What the regulation actually says
"Item 4 — Advisory Business. … describe the types of advisory services you offer. If you hold yourself out as specializing in a particular type of advisory service, such as financial planning, quantitative analysis, or market timing, explain the nature of that service in greater detail. … If you use any … artificial-intelligence, algorithmic, or predictive-analytics tool to formulate advice or manage client portfolios, describe the tool, its function in your advisory process, its data inputs, and the material limitations of its outputs …"
Form ADV Part 2A, Item 4 (as amended 2026) -- Advisory Business AI disclosure
"It shall be unlawful for any person willfully to make any untrue statement of a material fact in any registration application or report filed with the Commission under section 203 or 204, or willfully to omit to state in any such application or report any material fact which is required to be stated therein."
Investment Advisers Act §207 -- 15 U.S.C. §80b-7
What this means in plain English
Your firm brochure must describe:
- Which AI tools are in use (recommendation engine, planning-narrative generator, marketing content, chatbot, KYC extraction — each one)
- The function each tool serves in the advisory process
- The data inputs each tool uses
- The material limitations of each tool's outputs — the piece that is genuinely new for most firms in 2026
"We use AI" is not a disclosure. It is a placeholder for a disclosure. The "material limitations" language is where firms with drifting or silently biased AI systems have the largest gap.
What triggers the exposure in the sample
A brochure that describes the portfolio-recommendation engine without disclosing a documented per-client-group over-recommendation pattern is a Form ADV omission the moment the firm knows the pattern exists. Section 207 attaches. And because the brochure gets delivered to prospective clients, the misstatement is repeated on every delivery.
What the $499 Snapshot shows against this rule
- Independent measurement of the AI's per-client-group behavior — the raw material for the "material limitations" disclosure
- Dated event log of the drift window — identifies the brochure-update trigger
- 3 fix-first items scoped to that AI surface — the "how the firm addresses the limitation" language for the brochure
- Signed independent-verifier declaration — the record the firm can cite in Part 2A as its monitoring basis
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The fact set your Form ADV Part 2A AI-disclosure section needs to be accurate — on your actual AI surface.
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