1 Miss. Code. R. 14-6.09 - Minimum Financial Requirements for Investment Advisers

A. An investment adviser registered or required to be registered under the Act who has custody of client funds or securities or requires payment of advisory fees six (6) months or more in advance and in excess of Twelve Hundred Dollars ($1,200.00) shall maintain at all times a minimum net worth of Thirty-Five Thousand Dollars ($35,000.00) except:

1. An investment adviser posts a bond pursuant to Rule 6.07.

2. Pursuant to these Rules, an investment adviser is otherwise exempted from complying with the bonding and net worth requirements.

B. An investment adviser registered or required to be registered under the Act who has discretionary authority over client funds or securities but does not have custody of client funds or securities shall maintain at all times a minimum net worth of Ten Thousand Dollars ($10,000.00) except:

1. An investment adviser posts a bond pursuant to Rule 6.07.

2. Pursuant to these Rules, an investment adviser is otherwise exempted from complying with the bonding and net worth requirements.

C. An investment adviser registered or required to be registered under the Act shall maintain at all times a positive net worth.

D. Unless otherwise exempted, as a condition of the right to transact business in this state, every investment adviser registered or required to be registered under the Act shall by the close of business on the next business day notify the Division if such investment adviser's net worth is less than the minimum required. After transmitting such notice, each investment adviser shall file by the close of business on the next business day a report with the Division of its financial condition, including the following:

1. A trial balance of all ledger accounts;

2. A statement of all client funds or securities which are not segregated;

3. A computation of the aggregate amount of client ledger debit balances; and

4. A statement as to the number of client accounts.

E. Net Worth, for the purposes of this Rule, shall mean an excess of assets over liabilities, as determined by generally accepted accounting principles, but shall not include as assets: prepaid expenses (except as to items properly classified as assets under generally accepted accounting principles), deferred charges, goodwill, franchise rights, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense, all other assets of intangible nature; home, home furnishings, automobile(s), and any other personal items not readily marketable in the case of an individual; advances or loans to stockholders and officers in the case of a corporation; and advances or loans to partners in the case of a partnership.

F. Discretionary Authority, for the purposes of this Rule, 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.

G. For the purposes of this Rule, an investment adviser shall not be deemed to be exercising discretion when it places trade orders with a broker-dealer pursuant to a third-party trading agreement if:

1. The investment adviser has executed a separate investment adviser contract exclusively with its client which acknowledges that a third-party trading agreement will be executed to allow the investment adviser to effect securities transactions for the client in the client's broker-dealer account;

2. The investment adviser contract specifically states that the client does not grant discretionary authority to the investment adviser and the investment adviser in fact does not exercise discretion with respect to the account; and

3. A third-party trading agreement is executed between the client and a broker-dealer which specifically limits the investment adviser's authority in the client's broker-dealer account to the placement of trade orders and deduction of investment adviser fees.

H. The Division may require that a current appraisal be submitted in order to establish the worth of any asset.

I. Every investment adviser that has its principal place of business in a state other than this state shall maintain only such minimum net worth as required by the state in which the investment adviser maintains its principal place of business, provided the investment adviser is registered or licensed in such state and is in compliance with such state's minimum capital requirements.

Notes

1 Miss. Code. R. 14-6.09

Miss. Code Ann. § 75-71-411(a) (2020).

Amended 6/3/2018 Amended 4/18/2022 Amended 1/29/2024 Amended 3/14/2024