(Dow Jones) The deadline for more and clearer disclosure by registered investment advisors is looming--and many of them aren't set to comply with the new rules.

To give clients and prospects more information on their investment advisors, the Securities and Exchange Commission last summer amended Part 2 of its Form ADV, a document investment professionals must complete annually to register as investment advisors.

The new Part 2 replaces a check-box format with narratives using "short sentences, definite, everyday words, and the active voice" to provide detailed resumes for all professional staffers, and disclose things like amount of assets under management, fees, transaction costs, fund expenses, conflicts of interest, loss risks, and legal or disciplinary events, according to the SEC's 174-page explanation of the new disclosure requirements.

Many RIAs seem slow to comply with the new rule. In a survey of nearly 1,600 RIAs by the National Society of Compliance Professionals, only 19% had completed Part 2 by late last month--a finding the society called surprising.

"There's going to be a gigantic mess in March and April," says Zachary Gronich, chief executive of RIA In A Box, a consulting and compliance-outsourcing firm. Of the 26,000 or so SEC- and state-registered investment advisors out there, he figures at least 10,000 won't meet the SEC's March 31 deadline--a cutoff shared by most states, which supervise the lion's share of RIAs.

He believes many RIAs are in denial. "People like to think things like this don't apply to them," he says. "They say things like, 'I'm so small' or 'My RIA is so simple that this can't be for me,' so they ignore it."

The SEC has been sending out "really imposing, government-looking" letters about the new Part 2 requirements, Gronich says. For their part, most states are also doing what they can with limited resources, he says, but some are sending reminders "that are easy to glance at and throw away."

In one instance, a state official mistakenly told one advisory firm no update was needed if the firm had no changes to make, according to Gronich. "That would be true only in years after a new [Part 2] is filed, and only if the firm didn't add or lose a penny in assets under management and didn't add or lose a single client in the course of a whole year."

Where the old-look Part 2 took a few hours to complete, the new one consumes between 16 and 60 hours and calls for much more disclosure, according to the SEC. But Kenneth Hojnacki of Wisconsin's Department of Financial Institutions, told Dow Jones Newswires that differences between the versions amounts to a mere "format change."

Christopher Winn, head of the RIA consulting firm AdvisorAssist, disagrees.

"They're not just asking what you do," Winn says. "Now they also want to know what you don't do."

Fortunately for laggard RIAs, hard penalties don't seem to be in store for those who fail to meet Part 2 deadlines; not off the bat anyway. "They would be in violation of renewal procedures, and they'd probably get a letter saying you've got two weeks to comply," says Gronich.

Hojnacki agrees. Although there is "no set penalty" for non-compliance in his state, inaction would probably trigger a series of warnings. Then, if the RIA takes no action at all, "there would be the possibility of suspension."

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