(a) An investment adviser registered under
section 301 of the act (
70 P.S. §
1-301) that has custody of client funds or
securities or requires prepayment of advisory fees 6 months or more in advance
and in excess of $1,200 per client shall file with the Department an audited
balance sheet as of the end of its fiscal year with the following conditions:
(1) The balance sheet shall be prepared in
accordance with generally accepted accounting principles and contain an
unqualified opinion of an independent certified public accountant.
(2) The accountant shall submit, as a
supplementary opinion, comments based on the audit as to material inadequacies
found to exist in the accounting system, the internal accounting controls and
procedures for safeguarding securities and funds, and shall indicate corrective
action taken or proposed.
(b) An investment adviser registered under
section 301 of the act that has discretionary authority over client funds or
securities, but not custody, shall file with the Department a balance sheet as
of the end of its fiscal year with the following conditions:
(1) The balance sheet is not required to be
audited but shall be prepared in accordance with generally accepted accounting
principles.
(2) The balance sheet
must contain a representation by the investment adviser that it is true and
accurate.
(c) A sole
proprietor registered under section 301 of the act required to file an
affirmative statement under §
303.012(c)(3)
(relating to investment adviser registration procedure) shall file with the
Department an affirmative statement as of the end of its fiscal year.
(d) Except as provided in subsections (e) and
(f), investment advisers required to file the reports of financial condition
set forth in subsections (a)-(c) shall file the reports with the Department
within 120 days of the investment adviser's fiscal year end.
(e) The requirements of subsection (d) do not
apply to an investment adviser registered under section 301 of the act whose
principal place of business is in a state other than this Commonwealth if the
investment adviser:
(1) Is registered in the
state in which it maintains its principal place of business.
(2) Is in compliance with the financial
reporting requirements of the state in which it maintains its principal place
of business.
(3) Has not taken
custody of assets of any client residing in this Commonwealth at any time
during the preceding 12-month period.
(f) The requirements of subsection (d) do not
apply to an investment adviser registered under section 301 of the act who:
(1) Has custody of client funds or securities
solely as a result of activities set forth in §
303.042(a)(3)
(relating to investment adviser capital requirements).
(2) Is in compliance with the requirements
set forth in §
303.042(a)(3).
