Form ADV requires you to identify the individuals and entities that own and control your advisory firm. This information goes on Schedules A and B, and getting it wrong is a common source of filing errors.
What a Control Person Is
A control person is anyone who directly or indirectly controls your investment adviser, is controlled by your adviser, or is under common control with your adviser. "Control" means the power to direct or cause the direction of management or policies, whether through ownership, contract, or otherwise.
In practice, this typically includes:
- Principals who own 25% or more of the advisory entity
- Managing members or general partners of the management company
- Entities in the ownership chain above your adviser (holding companies, parent entities)
- Individuals who have the authority to make investment decisions or hire/fire key personnel
Schedule A: Direct Owners and Executive Officers
Schedule A lists individuals and entities that directly own 5% or more of your advisory firm, plus all officers, directors, and managing members. For a typical fund management company structured as an LLC, this means all members with 5% or more ownership, plus the managing member(s).
You report each person's name, title, ownership percentage, and CRD number (if they have one from prior securities industry activity).
Schedule B: Indirect Owners
Schedule B lists entities and individuals that indirectly own 25% or more of your adviser through an ownership chain. If your management company is owned by a holding company, which is in turn owned by individuals, those individuals appear on Schedule B.
You need to trace the full ownership chain. If Person A owns 50% of Holding Co, which owns 100% of Management Co (your adviser), Person A is an indirect owner at 50% and belongs on Schedule B.
Common Issues
Missing entities in the chain. If there is a holding company or GP entity between the principals and the management company, it needs to appear. Skipping intermediate entities is a frequent error.
Ownership changes. Adding or removing partners, or changing ownership percentages, requires an amendment to Form ADV. These are considered material changes.
CRD numbers. If a control person has previously been registered in the securities industry (as a broker-dealer representative, for example), they will have a CRD number. Include it. If they do not have one, leave it blank.
Spousal ownership. In community property states, a spouse may be considered an indirect owner even if they are not involved in the business.
Why It Matters
Accurately reporting control persons is a regulatory requirement, and the SEC does review these schedules. Inaccurate reporting can trigger follow-up inquiries or deficiency findings during an examination. It also matters because control persons' disciplinary histories are disclosed on your filing, and changes in control may require prompt updates.
How Capital Company Helps
Capital Company prepares and files Form D, blue sky filings, and Form ADV for funds on the platform. Schedule a demo to learn more.
This article is for informational purposes only and does not constitute legal advice. Consult qualified legal counsel for advice specific to your situation.