1 Miss. Code. R. 14-6.19 - Record Keeping Requirements for Investment Advisers
A. Every investment
adviser registered or required to be registered under the Act shall make and
keep true, accurate, and current the following books, ledgers, and records:
1. A journal or journals, including cash
receipts and disbursement records, and any other records of original entry
forming the basis of entries in any ledger.
2. General and auxiliary ledgers (or other
comparable records) reflecting asset, liability, reserve, capital, income, and
expense accounts.
3. A memorandum
of each order given by the investment adviser for the purchase or sale of any
security, of any instruction received by the investment adviser from the client
concerning the purchase, sale, receipt, or delivery of a particular security,
and of any modification or cancellation of any such order or instruction. The
memoranda shall show the terms and conditions of the order, instruction,
modification, or cancellation; shall identify the person connected with the
investment adviser who recommended the transaction to the client and the person
who placed the order; and shall show the account for which entered, the date of
entry, and the bank or broker-dealer by or through whom executed, where
appropriate. Orders entered pursuant to the exercise of discretionary power
shall be so designated.
4. All
checkbook, bank statements, canceled checks, and cash reconciliations of the
investment adviser.
5. All bills or
statements (or copies of), paid or unpaid, relating to the investment adviser's
business as an investment adviser.
6. All trial balances, financial statements,
and internal audit working papers relating to the investment adviser's
business.
7. Originals of all
written communications received and copies of all written communications sent
by the investment adviser relating to:
a. Any
recommendation made or proposed to be made and any advice given or proposed to
be given;
b. Any receipt,
disbursement, or delivery of funds or securities; or
c. The placing or execution of any order to
purchase or sell any security, provided, however,
i. That the investment adviser shall not be
required to keep any unsolicited market letters and other similar
communications of general public distribution not prepared by or for the
investment adviser, and
ii. That if
the investment adviser sends any notice, circular, or other advertisement
offering any report, analysis, publication, or other investment advisory
service to more than ten (10) persons, the investment adviser shall not be
required to keep a record of the names and addresses of the persons to whom it
was sent, except that if the notice, circular or advertisement is distributed
to persons named on any list, the investment adviser shall retain with the copy
of the notice, circular, or advertisement a memorandum describing the list and
its source.
8.
A list or other record of all accounts which identifies the accounts in which
the investment adviser is vested with any discretionary power with respect to
the funds, securities, or transactions of any client.
9. A copy of all powers of attorney and other
evidence of the granting of any discretionary authority by any client to the
investment adviser.
10. A copy in
writing of each agreement entered into by the investment adviser with any
client and all other written agreements otherwise relating to the investment
adviser's business as an investment adviser.
11. A file containing a copy of each notice,
circular, advertisement, newspaper article, investment letter, bulletin, or
other communication, including by electronic media, that the investment adviser
circulates or distributes, directly or indirectly, to two (2) or more persons
(other than persons connected with the investment adviser). If the notice,
circular, advertisement, newspaper article, investment letter, bulletin, or
other communication, including by electronic media, recommends the purchase or
sale of a specific security and does not state the reasons for the
recommendation, a memorandum of the investment adviser indicating the reasons
for the recommendation shall also be included.
12. A record of every transaction in a
security in which the investment adviser or any advisory representative (as
hereinafter defined) of the investment adviser has, or by reason of any
transaction acquires, any direct or indirect beneficial ownership.
a. The record shall state the title and
amount of the security involved; the date and nature of the transaction (i.e.,
purchase, sale or other acquisition or disposition); the price at which it was
effected; and the name of the broker-dealer or bank with or through whom the
transaction was effected. The record may also contain a statement declaring
that the reporting or recording of any transaction shall not be construed as an
admission that the investment adviser or advisory representative has any direct
or indirect beneficial ownership in the security. A transaction shall be
recorded not later than ten (10) days after the end of the calendar quarter in
which the transaction was effected.
b. The investment adviser or advisory
representative shall not be required to keep records of:
i. Transactions effected in any account over
which neither the investment adviser nor any advisory representative of the
investment adviser has any direct or indirect influence or control;
and
ii. Transactions in securities
which are direct obligations of the United States.
c. For purposes of Subsection (A)(12) of this
Rule, the following definitions will apply:
i.
The term Advisory Representative shall mean any partner, officer,
or director of the investment adviser; any employee who participates in any way
in the determination of which recommendations shall be made; any employee who,
in connection with his duties, obtains any information concerning which
securities are being recommended prior to the effective dissemination of the
recommendations; and any of the following persons who obtain information
concerning securities recommendations being made by the investment adviser
prior to the effective dissemination of the recommendations:
(A) Any person in a control relationship to
the investment adviser,
(B) Any
affiliated person of a controlling person, and
(C) Any affiliated person of an affiliated
person.
ii.
Control shall mean the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely the
result of an official position with such company. Any person who owns
beneficially, either directly or through one or more controlled companies, more
than twenty-five percent (25%) of the voting securities of a company shall be
presumed to control such company.
d. An investment adviser shall not be deemed
to have violated the provisions of Subsection (A)(12) of this Rule because of
the failure to record securities transactions of any advisory representative if
the investment adviser establishes that it instituted adequate procedures and
used reasonable diligence to promptly obtain reports of all transactions
required to be recorded.
13. Notwithstanding the provisions of
Subsection (A)(12) above, where the investment adviser is primarily engaged in
a business or businesses other than advising investment advisory clients, a
record of every transaction in a security in which the investment adviser or
any advisory representative (as hereinafter defined) of the investment adviser
has, or by reason of any transaction acquires, any direct or indirect
beneficial ownership.
a. The record shall
state the title and amount of the security involved; the date and nature of the
transaction (i.e., purchase, sale, or other acquisition or disposition); the
price at which it was effected; and the name of the broker-dealer or bank with
or through whom the transaction was effected. The record may also contain a
statement declaring that the reporting or recording of any transaction shall
not be construed as an admission that the investment adviser or advisory
representative has any direct or indirect beneficial ownership in the security.
A transaction shall be recorded not later than ten (10) days after the end of
the calendar quarter in which the transaction was effected.
b. The investment adviser or any advisory
representative shall not be required to keep records of:
i. Transactions effected in any account over
which neither the investment adviser nor any advisory representative of the
investment adviser has any direct or indirect influence or control;
and
ii. Transactions in securities
which are direct obligations of the United States.
c. An investment adviser is "primarily
engaged in a business or businesses other than advising investment advisory
clients" when, for each of its most recent three (3) fiscal years or for the
period of time since organization, whichever is lesser, the investment adviser
derived, on an unconsolidated basis, more than fifty percent (50%) of:
i. Its total sales and revenue, and
ii. Its income (or loss) before income taxes
and extraordinary items from such other business or businesses.
d. For the purposes of Subsection
(A)(13) of this Rule, the following definitions will apply:
i. The term Advisory
Representative, when used in connection with a company primarily engaged
in a business or businesses other than advising investment advisory clients,
shall mean any partner, officer, director, or employee of the investment
adviser who participates in any way in the determination of which
recommendation shall be made, or whose functions or duties relate to the
determination of which securities are being recommended prior to the effective
dissemination of the recommendations. The term shall also apply to any of the
follow persons who obtain information concerning securities recommendations
being made by the investment adviser prior to the effective dissemination of
such recommendations or of the information concerning the recommendations:
(A) Any person in a control relationship to
the investment adviser;
(B) Any
affiliated person of a controlling person; and
(C) Any affiliated person of an affiliated
person.
ii.
Control shall mean the power to exercise a controlling influence
over the management policies of a company unless such power is solely the
result of an official position with such company. Any person who owns
beneficially, either directly or through one or more controlled companies, more
than twenty-five percent (25%) of the voting securities of a company shall be
presumed to control such company.
e. An investment adviser shall not be deemed
to have violated the provisions of Subsection (A)(13) of this Rule because of
the failure to record securities transactions of any advisory representative if
the investment adviser establishes that it instituted adequate procedures and
used reasonable diligence to promptly obtain reports of all transactions
required to be recorded.
14. A copy of each written statement,
amendment, or revision given or sent to any client or prospective client of the
investment adviser in accordance with the provisions of Rules
6.23 and
6.29 and a record of the dates that
each written statement, amendment, or revision was given, or offered to be
given, to any client or prospective client who subsequently becomes a
client.
15. For each client that
was obtained by the adviser by means of a solicitor to whom a cash fee was paid
by the adviser:
a. Evidence of a written
agreement to which the adviser is a party related to the payment of such
fee;
b. A signed and dated
acknowledgment of receipt from the client evidencing the client's receipt of
the investment adviser's disclosure statement and a written disclosure
statement of the solicitor; and
16. All accounts, books, internal working
papers, and any other records or documents that are necessary to form the basis
for or demonstrate the calculation of the performance or rate of return of all
managed accounts or securities recommendations in any notice, circular,
advertisement, newspaper article, investment letter, bulletin, or other
communication, including but not limited to electronic media that the
investment adviser circulates or distributes, directly or indirectly, to two
(2) or more persons (other than persons connected with the investment adviser);
provided, however, that, with respect to the performance of managed accounts,
the retention of all account statements, if they reflect all debits, credits,
and other transactions in a client's account for the period of the statement,
and all worksheets necessary to demonstrate the calculation of the performance
or rate of return of all managed accounts shall be deemed to satisfy the
requirements of this Subsection.
17. A file containing a copy of all written
communications received or sent (1) regarding any litigation involving the
investment adviser or any investment adviser representative or employee and (2)
regarding any written customer or client complaint.
18. Written information about each investment
advisory client that is the basis for making any recommendation or providing
any investment advice to such client.
19. Written procedures that supervise the
activities of employees and investment adviser representatives and that are
reasonably designed to achieve compliance with applicable securities laws and
regulations.
20. A file containing
a copy of each document (other than any notices of general dissemination) that
was filed with or received from any state or federal agency or self-regulatory
organization and that pertains to the registrant or its investment adviser
representatives. The file should contain, but is not limited to, all
applications, amendments, renewal filings, and correspondence.
21. Copies, with original signatures of the
investment adviser's appropriate signatory and the investment adviser
representative, of each initial Form U4; Each amendment to Disclosure Reporting
Pages (DRPs U4) must be retained by the investment adviser (filing on behalf of
the investment adviser representative) and must be made available for
inspection upon regulatory request.
22. When the adviser has inadvertently held
or obtained a client's securities or funds and returned them to the client
within three (3) business days of receiving them or has forwarded checks drawn
by clients and made payable to third parties within three (3) business days of
receipt, the adviser will be considered as not having custody but shall keep
the following records:
a. For receipt of
client securities or funds, a ledger or other listing of all securities or
funds received and returned, including the following information:
i. Issuer;
ii. Type of security and series;
iii. Date of issue;
iv. For debt instruments, the denomination,
interest rate, and maturity date;
v. Certificate number, including alphabetical
prefix or suffix;
vi. Name in which
registered;
vii. Date received by
the adviser;
viii. Date returned to
client or sender;
ix. Form of
delivery to client or sender, or copy of the form of delivery to client or
sender; and
x. Mail confirmation
number, if applicable, or confirmation by client or sender of the fund's or
security's return.
b. For
checks made payable to a third party, a ledger or other listing of all checks
received and forwarded, including the following information:
i. Payor;
ii. Type of check (personal, corporate,
etc.);
iii. Date of
check;
iv. Amount of
check;
v. Check number;
vi. Payee;
vii. Date received by the adviser;
viii. Date forwarded to the third
party;
ix. Form of delivery to
third party, or copy of the form delivery to third party; and
x. Mail confirmation number, if applicable,
or confirmation by the third party of the check's receipt.
xi. A copy of the check will suffice for
items (b)(i)-(vi) above.
23. If an investment adviser obtains
possession of securities that are acquired from the issuer in a transaction or
chain of transactions not involving any public offering that comply with the
exception from custody under Rule
6.35(B)(2), the
adviser shall keep the following records:
a. A
record showing the issuer or current transfer agent's name, address, phone
number, and other applicable contract information pertaining to the party
responsible for recording client interests in the securities; and
b. A copy of any legend, shareholder
agreement, or other agreement showing that those securities that are
transferable only with prior consent of the issuer or holders of the
outstanding securities of the issuer.
B.
Additional recordkeeping
requirements for advisers with custody.
1. If an investment adviser has custody, the
records required to be made and kept under Subsection (A) of this Rule shall
also include:
a. A copy of any and all
documents executed by the client (including limited power of attorney) under
which the adviser is authorized or permitted to withdraw a client's funds or
securities maintained with a custodian upon the adviser's instruction to the
custodian.
b. A journal or other
record showing all purchases, sales, receipts, and deliveries of securities
(including certificate numbers) for all accounts and all other debits and
credits to the accounts.
c. A
separate ledger account for each client showing all purchases, sales, receipts,
and deliveries of securities, as well as the date and price of each purchase
and sale and all debits and credits.
d. Copies of confirmations of all
transactions effected by or for the account of any client.
e. A record for each security in which any
client has a position; such record shall show the name of each client having
any interest in each security, the amount or interest of each client, and the
location of each security.
f. A
copy of each of the client's quarterly account statements, as generated and
delivered by the qualified custodian. If the adviser also generates a statement
that is delivered to the client, the adviser shall also maintain copies of such
statements along with the date such statements were sent to the
clients.
g. If applicable to the
adviser's situation, a copy of the auditor's report, as well as financial
statements and a letter verifying the completion of the examination by an
independent certified public accountant and describing the nature and extent of
the examination.
h. A record of any
finding by the independent certified public accountant of any material
discrepancies found during the examination.
i. If applicable, evidence of the client's
designation of an independent representative.
2. If an investment adviser has custody
because it advises a pooled investment vehicle, as used in Rule
6.35(C)(1)(d), the
adviser shall also keep the following records:
a. True, accurate, and current account
statements.
b. Where the adviser
complies with Rule
6.35(B)(3), the
records required to be made and kept shall include:
i. The date(s) of the audit;
ii. A copy of the audited financial
statements; and
iii. Evidence of
the mailing of the audited financials to all limited partners, members, or
other beneficial owners within one hundred twenty (120) days of the end of its
fiscal year.
c. Where the
adviser complies with Rule
6.35(A)(7), the
records required to be made and kept shall include:
i. A copy of the written agreement with the
independent party reviewing all fees and expenses, indicating the
responsibilities of the independent third party; and
ii. Copies of all invoices and receipts
showing approval by the independent party for payment through the qualified
custodian.
C. Every investment adviser subject to
Subsection (A) of this Rule who renders any investment supervisory or
management service to any client shall, with respect to the portfolio being
supervised or managed and to the extent that the information is reasonably
available to or obtainable by the investment adviser, make and keep true,
accurate, and current:
1. Records showing for
each separate client the securities purchased and sold as well as the date,
amount, and price of each purchase and sale.
2. For each security in which any client has
a current position, information from which the investment adviser can promptly
furnish the name of each the client and the current amount or interest of the
client.
D. Any books or
records required by this Rule may be maintained by the investment adviser in
such manner that the identity of any client to whom the investment adviser
renders investment supervisory services is indicated by numerical or
alphabetical code or some similar designation.
E. Every investment adviser subject to
Section (A) of this Rule shall preserve the following records in the manner
prescribed:
1. All books and records required
to be made under the provisions of Subsections (A) through (C) of this Rule
(except for books and records required to be made under the provisions of
Subsections (A)(11) and (A)(16)), shall be maintained and preserved in an
easily accessible place for a period of not fewer than five (5) years from the
end of the fiscal year during which the last entry was made on record. The
first two (2) years they shall be kept in the principal office of the
investment adviser.
2. Partnership
articles and any amendments, articles of incorporation, charters, minute books,
and stock certificate books of the investment adviser and of any predecessor,
shall be maintained in the principal office of the investment adviser and
preserved until at least three (3) years after termination of the
enterprise.
3. Books and records
required to be made under the provisions of Subsections (A)(11) and (A)(16) of
this Rule shall be maintained and preserved in an easily accessible place for a
period of not fewer than five (5) years, the first two (2) years in an the
principal office of the investment adviser, from the end of the fiscal year
during which the investment adviser last published or otherwise disseminated,
directly or indirectly, the notice, circular, advertisement, newspaper article,
investment letter, bulletin, or other communication, including by electronic
media.
4. Books and records
required to be made under the provisions of Subsections (A)(17) through (20) of
this Rule shall be maintained and preserved in an easily accessible place for a
period of not fewer than five (5) years from the end of the fiscal year during
which the last entry was made on such record or for the time period during
which the investment adviser was registered or required to be registered in the
state, if less. The first two (2) years they shall be kept in the principal
office of the investment adviser.
5. Notwithstanding other record preservation
requirements of this Rule, the following records or copies shall be maintained
at the business location of the investment adviser from which the customer or
client is being provided or has been provided with investment advisory
services:
a. Records required to be preserved
under Subsections (A)(3), (7)-(10), (14)-(15), (17)-(19); (B); and (C) of this
Rule, inclusive; and
b. The records
or copies required under the provision of Subsections (A)(11) and (A)(16) when
such records or related records identify the name of the investment adviser
representative providing investment advice from that business location, or
identify the business location's physical address, mailing address, electronic
mailing address, or telephone number. The records will be maintained for the
period described in this Subsection (E).
F. An investment adviser subject to
Subsection (A), before ceasing to conduct or discontinuing business as an
investment adviser, shall arrange for and be responsible for the preservation
of the books and records required to be maintained and preserved under this
Rule for the remainder of the period specified in this Rule, and it shall
notify the Division in writing of the exact address where the books and records
will be maintained during the period.
G.
Production of records
1. Pursuant to this Rule, the records
required to be maintained and preserved may be immediately produced or
reproduced, and maintained and preserved for the required time, by an
investment adviser on:
a. Paper or hard copy
form, as those records are kept in their original form; or
b. Micrographic media, including microfilm,
microfiche, or any similar medium; or
c. Electronic storage media, including any
digital storage medium or system that meets the terms of this Rule.
2. The investment adviser must:
a. Arrange and index the records in a way
that permits easy location, access, and retrieval of any particular
record;
b. Provide promptly any of
the following that the Division (by its examiners or other representatives) may
request:
i. A legible, true, and complete copy
of the record in the medium and format in which it is stored;
ii. A legible, true, and complete printout of
the record; and
iii. Means to
access, view, and print the records; and
c. Separately store, for the time required
for preservation of the original record, a duplicate copy of the record on any
medium allowed by this Rule.
3. In the case of records created or
maintained on electronic storage media, the investment adviser must establish
and maintain procedures:
a. To maintain and
preserve the records so as to reasonably safeguard them from loss, alteration,
or destruction;
b. To limit access
to the records to properly authorized personnel and the Division (including its
examiners and other representatives); and
c. To reasonably ensure that any reproduction
of a non-electronic original record on electronic storage media is complete,
true, and legible when retrieved.
H. For the purposes of this Rule,
Investment Supervisory Services means the giving of continuous
advice as to the investment of funds on the basis of the individual needs of
each client; and Discretionary Power shall not include discretion
as to the price at which or the time when a transaction is or is to be
effected, if, before the order is given by the investment adviser, the client
has directed or approved the purchase or sale of a definite amount of the
particular security.
I. Any book or
other record made, kept, maintained and preserved in compliance with SEC Rules
17a-3 (17 C.F.R. §
240.17a-3) and 17a-4 (17 C.F.R. §
240.17a-4) under the Securities Exchange Act
of 1934, which is substantially the same as the book or other record required
to be made, kept, maintained and preserved under this Rule, shall be deemed to
be made, kept, maintained and preserved in compliance with this Rule.
J. Every investment adviser registered or
required to be registered in this state and that has its principal place of
business in a state other than this state shall be exempt from the requirements
of this Rule, provided the investment adviser is licensed or registered in such
state and is in compliance with such state's recordkeeping
requirements.
K. Every investment
adviser that exercises voting authority with respect to client securities shall
make, maintain, and preserve records in compliance with SEC Rule 204-2(c)(2)
(17 C.F.R. §
275.204-2(c)(2)) relating to
proxy voting.
Notes
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