[46 Pa.B. 3420]
[Saturday, July 2, 2016]

[Continued from previous Web Page]

CHAPTER 207. GENERAL REGISTRATION PROVISIONS

§ 207.050. Reports by engineers, appraisers and others.

 (a) The [Commission] Department may, under section 207(e) of the act (70 P.S. § 1-207(e))[, by order], require as a condition of registration that the issuer or other person seeking to register securities for sale submit a technical report[,].

 (1) The report must be prepared and certified by an engineer, appraiser, accountant or other professional person with respect to the value of an asset held by the issuer or other material matter [deemed by it] considered by the Department to be reasonably related to the conduct of the issuer's business.

 (2) The cost of preparation of the report will be borne by the applicant for registration.

 [(b) The Commission may require that the report referred to in subsection (a) be prepared by an employee of the Commonwealth. In such event the Commission will notify the applicant for registration of the approximate cost of preparing the report, including travel and living expenses. Prior to commencement of preparation of the report, the applicant shall deposit with the Commission funds sufficient to cover costs with instructions authorizing disbursement of such funds as expenses are incurred. If it appears additional costs will be incurred in preparing the report, the applicant will be notified and required to deposit with the Commission the additional moneys necessary to permit completion of the work.]

 (b) The Department may require that an employee of the Commonwealth prepare the report referred to in subsection (a). If this report is required, the Department will:

 (1) Notify the applicant for registration of the approximate cost of preparing the report, including travel and living expenses.

 (2) Require the applicant to deposit with the Department funds sufficient to cover costs with instructions authorizing disbursement of the funds as expenses are incurred before the commencement of preparation of the report.

 (3) Notify the applicant if it appears additional costs will be incurred in the preparation of the report and require the applicant to deposit with the Department the additional moneys necessary to permit completion of the work.

 (c) A person who prepares for submission or submits a technical report to the [Commission] Department in response to the [Commission's] Department request, and a person who prepares for submission or submits a technical report intended to be included or referred to in any part of the registration statement, shall attach to the report [a]:

 (1) A statement as to the person's qualifications and experience [and a further].

 (2) A statement as to a material relationship or other factor which would bear [upon] on the person's independence with respect to the subject matter to which or the person to whom the report relates.

§ 207.071. Escrow of promotional securities.

 (a) The [Commission will, where it deems] Department will, if it considers necessary for the protection of investors, or in the public interest, and subject to the limitation of section 207(g) of the act (70 P.S. § 1-207(g)), require as a condition to the registration of securities, whether to be sold by the issuer or another person, that promotional securities be placed in escrow.

 (b) The escrow depository shall be a bank or trust company approved by the [Commission, provided, that, if] Department.

 (c) If the escrow depository does not maintain an office in this Commonwealth, the depository shall file with the [Commission] Department an irrevocable consent to service of process with respect to actions arising out of its duties as escrow depository.

 [(b) For the purposes of this section, the term ''promotional securities'' includes securities which are:

 (1) Issued within the 5-year period immediately preceding the date of the filing of a registration statement for a consideration substantially different from the proposed public offering price and for which price differential there is no commensurate change in the earnings or financial position of the issuer.

 (2) Issued in consideration for services.

 (3) Issued in consideration for tangible or intangible property, such as patents, copyrights, licenses or goodwill.

 (4) Issued within the 5-year period immediately preceding the date of the filing of a registration statement to a promoter or proposed to be issued to a promoter at a price substantially lower than or on terms and conditions substantially more favorable than those on which securities of the same or a similar class or series have been or are to be sold to public investors.

 (5) The subject of an order by the Commission which includes findings that the securities are promotional securities.

 (c)] (d) The escrow of promotional securities [shall] must be covered by an agreement which [shall be] is subject to the approval of the [Commission. One] Department.

 (e) The issuer shall file one manually signed copy of the agreement [shall be filed] with the [Commission prior to] Department before the effectiveness of a registration of the issuer's securities.

§ 207.072. Escrow of proceeds.

 (a) The [Commission, when it deems] Department, if it considers it necessary for the protection of investors, and subject to the limitation of section 207(g) of the act (70 P.S. § 1-207(g)), may require as a condition to the registration of securities, whether to be sold by the issuer or another person, that the proceeds [from]:

 (1) From the sale of the registered security in this Commonwealth be escrowed until the issuer receives a specified amount from the sale of the security either in this Commonwealth or elsewhere[; or that the proceeds from].

 (2) From the sale of the registered security be escrowed for a specific use as set forth in the prospectus.

 (b) The escrow depository shall be a bank or trust company [acceptable to the Commission] approved by the Department.

 [(b)] (c) The escrow of proceeds [shall] must be covered by an agreement [acceptable to the Commission] approved by the Department which, at a minimum, meets the following conditions:

 (1) The specified amount of proceeds shall be deposited in an interest bearing escrow or trust account, the terms of which are consistent with this subsection, particularly paragraph [(7)] (6).

 (2) The escrow depository [may not be] is not affiliated with the issuer or any officer, director, promoter or affiliate of the issuer or the underwriter of the securities which are the subject of the escrow or trust account.

 (3) The [agreement shall provide that the] escrowed proceeds are not subject to claims by creditors of the issuer, affiliates of the issuer or underwriters until the proceeds have been released to the issuer [pursuant to] under the terms of the agreement.

 [(4) A manually signed copy of the agreement shall be filed with the Commission and shall become part of the registration statement.

 (5) The agreement shall be signed by an] (4) An authorized officer of the issuer, an authorized officer of the underwriter, if applicable, and an authorized officer of the escrow depository sign the agreement.

 [(6)] (5) A summary of the principal terms of the agreement [shall be] are included in the prospectus.

 [(7)] (6) If the minimum amount of proceeds is not raised within the specified time period or for the specific purpose set forth in the prospectus, the escrowed proceeds shall be released and returned directly to investors by the escrow depository by first class mail together with interest earned and without deductions for expenses (including commissions, fees or salaries), except that payment of interest shall be waived on proceeds held in escrow for less than 90 days.

 (d) A manually signed copy of the agreement shall be filed with the Department and become part of the registration statement.

§ 207.091. Subscription contracts.

 [(a)] With respect to securities proposed to be sold under one of the following registration statements, a copy of a subscription or sale contract proposed to be used shall be filed with the [Commission] Department, as an exhibit, [prior to] before its use in this Commonwealth:

 (1) A registration statement filed under section 205 of the act (70 P.S. § 1-205) [when] if the securities to be sold are exempt from registration under section 5 of the Securities Act of 1933 (15 U.S.C.A. § 77e) under Regulation A promulgated under section 3(b) of the Securities Act of 1933 (15 U.S.C.A. § 77c(b)).

 (2) A registration statement filed under section 206 of the act (70 P.S. § 1-206) [when] if the securities to be sold are exempt from registration under section 5 of the Securities Act of 1933, under section 3(a)(4) or (11) of the Securities Act of 1933, Regulation A promulgated under section 3(b) of the Securities Act of 1933[,] or Rule 504 of Regulation D promulgated under section 3(b) of the Securities Act of 1933.

 (3) A registration statement filed under section 205 or 206 of the act [where] if the securities to be sold are interests in a direct public participation program.

§ 207.101. Effective period of registration statement.

 (a) A registration statement [which has become] that is effective under section 205(c) of the act (70 P.S. § 1-205(c)) shall continue in effect until the earliest of the following events:

 (1) Twelve months after the effective date of the registration statement under the act, except as provided in subsection (d).

 (2) Securities included in the registration statement have been sold or the distribution [terminated] ended in this Commonwealth, or both.

 (3) The [Commission] Department issues an order under section 208 of the act (70 P.S. § 1-208) denying, suspending or revoking effectiveness of the registration statement.

 (b) A registration statement [which has become] that is effective by order of the [Commission] Department under section 206 of the act (70 P.S. § 1-206) shall continue in effect until the earliest of the following events:

 (1) Twelve months after the effective date of the registration statement under the act.

 (2) Securities included in the registration statement are sold or the distribution [terminated] ended in this Commonwealth, or both.

 (3) The [Commission] Department issues an order under section 208 of the act denying, suspending or revoking effectiveness of the registration statement.

 (c) If the [Commission] Department has required more than one filing for a registration statement, a separate Form 207-J is required for each filing.

 (d) Except with respect to an open-end or closed-end investment company, face amount certificate company or unit investment trust, as those persons are classified in the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80a-64), the effective period of a section 205 registration statement may be extended beyond the initial 1-year effectiveness period specified in subsection (a)(1) in increments of 1-year periods up to a maximum of 3 years from the initial effectiveness date of the registration statement in this Commonwealth by filing the form designated as Form 207-J in accordance with the General Instructions thereto with the [Commission prior to] Department before the expiration of the currently effective period of registration.

 (e) The provisions of [this section] subsection (d) are not available if the issuer, during the [3 year] 3-year period from the initial effectiveness date of the registration statement in this Commonwealth, is required to file a new registration statement with Securities and Exchange Commission.

§ 207.130. Notice to purchasers under section 207(m).

 (a) This section applies to offerings of securities which are registered under section 206 of the act (70 P.S. § 1-206) and to securities transactions which are exempt from registration under [sections] section 203(d) and (p) of the act (70 P.S. § 1-203(d) and (p)) and, if required [by rule of the Commission] under rule of the Department, section 203(r) of the act.

 (b) The notice to purchasers required [by] under section 207(m)(1) of the act (70 P.S. § 1-207(m)(1)) [shall be given in accordance with all of the following] is in compliance with the act if the notice meets the following requirements:

 (1) [It shall be] The notice is in writing.

 (2) [Reference to the notice shall be made on the] The cover page of the prospectus used in connection with the offer and sale of the securities references the notice.

 (3) An explanation of the right of withdrawal contained in section 207(m)(1) of the act, including the procedure to be followed in exercising the right, [shall be given] is in the text of the prospectus.

 (4) [Reference to the right of withdrawal shall be made in any] A subscription agreement used references the right of withdrawal.

 (5) The reference to the right of withdrawal described in paragraph [(2) shall be] (3) is conspicuous, by setting it apart from other text and by underlining or capitalization.

 (c) The notice to purchasers required [by] under section 207(m)(2) of the act [shall be given in accordance with all of] is in compliance with the act if the notice meets the following requirements:

 (1) [It shall be] The notice is in writing.

 (2) An explanation of the right of withdrawal contained in section 207(m)(2) of the act, including the procedure to be followed in exercising the right, [shall be] is given.

 (3) The explanation of the right of withdrawal [shall be] is conspicuous, by setting it apart from other text and by underlining or capitalization.

 (d) [Timely notice of withdrawal of the purchase shall be deemed to have been given by a purchaser] A purchaser's notice of withdrawal from the purchase will be considered timely given within the 2-business day period set forth in section 207(m) of the act if, during the 2-business day period[, a written notice to withdraw from the purchase]:

 (1) The purchaser drafts a written notice of withdrawal from the purchase.

 (2) One of the following applies to the written notice, the notice is:

 [(1) Is actually] (i) Actually received by the issuer or its affiliate.

 [(2) Is sent] (ii) Sent electronically, including by [E-mail] e-mail or facsimile.

 [(3) Is deposited] (iii) Deposited in the United States Postal Service, sent registered or certified mail, and all applicable fees are paid by the sender.

 [(4) Is delivered] (iv) Delivered to a messenger or courier service for delivery with applicable fees paid by the sender.

 (e) The following language illustrates a right of withdrawal notice which complies with section 207(m)(1) of the act.

''If you have accepted an offer to purchase these securities made pursuant to a prospectus which contains a written notice explaining your right to withdraw your acceptance [pursuant to] under section 207(m) of the Pennsylvania Securities Act of 1972, you may elect, within two business days after the first time you have received this notice and a prospectus (which is not materially different from the final prospectus) to withdraw from your purchase agreement and receive a full refund of all moneys paid by you. Your withdrawal will be without any further liability to any person. To accomplish this withdrawal, you need only send a written notice (including a notice by facsimile or electronic mail) to the issuer (or underwriter if one is listed on the front page of the prospectus) indicating your intention to withdraw.''

 (f) The following language illustrates a right of withdrawal which complies with section 207(m)(2) of the act:

''If you have accepted an offer to purchase these securities and have received a written notice explaining your right to withdraw your acceptance [pursuant to] under section 207(m)(2) of the Pennsylvania Securities Act of 1972, you may elect, within two business days from the date of receipt by the issuer of your binding contract of purchase or, in the case of a transaction in which there is no binding contract of purchase, within two business days after you make the initial payment for the securities being offered, to withdraw your acceptance and receive a full refund of all moneys paid by you. Your withdrawal of acceptance will be without any further liability to any person. To accomplish this withdrawal, you need only send a written notice (including a notice by facsimile or electronic mail) to the issuer (or placement agent if one is listed on the front page of the offering memorandum) indicating your intention to withdraw.''

§ 207.140. [Signatures on electronic filings] (Reserved).

 [Under section 207(n) of the act (70 P.S. § 1-207(n)), the Commission authorizes the acceptance of a typed signature in lieu of any requirement for a manual signature on any notice required to be filed with the Commission under section 211 of the act (70 P.S. § 1-211) which is filed with the Commission electronically through its home page on the World Wide Web.]

CHAPTER 208. DENIAL FOR ABANDONMENT

 (Editor's Note: The following section is new and printed in regular type to enhance readability.)

§ 208.010. Denial for abandonment.

 (a) General rule. The Department may deny as abandoned an application for registration of securities which has been on file with the Department for a minimum of 12 consecutive months if the applicant failed to do any of the following:

 (1) Respond to the Department's notice of abandonment sent by first class mail to the applicant's last known address in the Department's files within 60 calendar days after the date the notification was mailed by the Department.

 (2) Respond to a request for additional information required under the act.

 (3) Otherwise complete the showing required for action on the application.

 (b) Voluntary withdrawal. An applicant may withdraw an application at any time with the consent of the Department.

 (c) No refund of fee. On denial for abandonment, the Department will not refund any filing fees paid before the date of abandonment or withdrawal.

CHAPTER 209. BOOKS, RECORDS AND ACCOUNTS

§ 209.010. Required records; report on sales of securities and use of proceeds.

 (a) An issuer who sells securities for their own account, directly or through an underwriter, in an offering registered or required to be registered under section 205 or 206 of the act (70 P.S. §§ 1-205 [or] and 1-206) or in an offering exempt from registration under [sections] section 202(e)[,] or 203(d), (p) or (r) of the act (70 P.S. §§ 1-202(e)[,] and 1-203(d), (p) [or] and (r)) shall preserve the following records during the period of the offering and for a period of 3 years following the last sale of securities in this Commonwealth or 1 year after the disposition of all proceeds, whichever is longer:

 (1) Ledgers, journals or other records showing payments received from the sale of securities, including date of receipt, amount and from whom received; and disbursements of the payments, including date paid, purpose, amount and to whom made.

 (2) A record showing money borrowed and money loaned together with a record of the collateral [therefor] for both.

 (3) Checkbooks, bank statements, copies of deposit slips, cancelled checks and bank record reconciliations.

 (4) Minute books and stock ledgers, including stock transfer records.

 (5) A copy of filings with the [Commission,] Department, and related correspondence and exhibits [related thereto].

 (6) Copies of communications sent or originated by the issuer pertaining to the offer, sale or transfer of securities, including subscription agreements, purchase contracts and confirmations.

 (7) A list of the names and addresses of persons to whom the securities were offered or sold[; the] with the following information included:

 (i) The type and amount of securities sold to each[; the].

 (ii) The consideration paid or promised by each[; the].

 (iii) The method of payment, that is, cash, check, property, services, note or other[; and the].

 (iv) The name of the broker-dealer or other persons who represented the issuer in effecting each sale.

 (b) Except as set forth in paragraph (3), report on sales of securities filing requirements are as follows:

 (1) [Issuers which have] An issuer which has an effective registration for the offer and sale of securities in this Commonwealth under section 206 of the act, except for open-end or closed-end investment companies, face amount certificate companies or unit investment trusts, as those persons are classified in the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80a-64), shall file a report on sales of securities with the [Commission] Department by completing Parts I and II of [the form in subsection (c)] Form 209 within 55 days after 1 year from the effective date of the registration statement filed under section 206 of the act.

 (2) An issuer which is an open-end or closed-end investment company, face amount certificate company or unit investment trust, as those persons are classified in the Investment Company Act of 1940, shall file with the [Commission] Department an annual report on sales of securities in this Commonwealth on Form NF adopted by [the North American Securities Administrators Association, Inc. (or a successor form thereto)] NASAA, or successor form, within the following time periods:

 (i) [With respect to an open-end or closed-end investment company or face amount certificate company, the report required by this subsection shall be filed with the Commission within 120 days after its fiscal year end.] 120 days after an open-end or closed-end investment company's or face amount certificate company's fiscal year end.

 (ii) [With respect to a unit investment trust, the report required by this subsection shall be filed with the Commission within] 60 days after 1 year from the date the registration statement relating to the securities sold in this Commonwealth became effective with the [United States] Securities and Exchange Commission with respect to a unit investment trust.

 (3) The following issuers are not required to file [the form in subsection (c)] Form 209 or Form NF [(or successor form thereto)], or successor form:

 (i) Issuers which are open-end or closed-end investment companies, face amount certificate companies or unit investment trusts, as those persons are classified in the Investment Company Act of 1940, that have paid the maximum fee specified in section 602(b.1)(iv) of the act (70 P.S. § 1-602(b.1)(iv)).

 (ii) Issuers with an effective registration statement for the offer and sale of securities in this Commonwealth under section 206 of the act which also have an effective registration statement under section 5 of the Securities Act of 1933 (15 U.S.C.A. § 77e) and have paid the maximum fee specified in section 602(b.1)(iii) of the act.

 (iii) Issuers with an effective registration statement for the offer and sale of securities in this Commonwealth under section 206 of the act which also have paid the maximum fee specified in section 602(b.1)(iii) of the act.

 [(c) The form for reports required in subsection (b), except for subsection (b)(2), shall be filed with the Commission on the form, designated by the Commission as Form 209 in accordance with the General Instructions thereto.]

CHAPTER 210. RETROACTIVE REGISTRATION

§ 210.010. Retroactive registration [of certain investment company securities].

 [(a) An open-end or closed-end investment company, face amount certificate company or unit investment trust, as those persons are classified in the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80b-21), which, during the effective period of registration under section 205 or 206 of the act (70 P.S. §§ 1-205 and 1-206) sold securities in this Commonwealth in excess of the aggregate amount registered for sale in this Commonwealth under section 205 or 206, may apply to the Commission on Form 210 in accordance with the General Instructions thereto to register the securities retroactive to the date of the initial registration.

 (b) No application filed on Form 210 may be granted if, at the time the application is filed with the Commission, a civil, criminal or administrative proceeding is pending alleging violations of section 201 of the act (70 P.S. § 1-201) for the sale of the securities in this Commonwealth or the securities were sold more than 24 months prior to the date Form 210 was filed with the Commission.]

 (a) Either of the following may apply to the Department on Form 210 in accordance with the General Instructions to register the securities retroactive to the date of the initial registration or to amend the notice filing retroactive to the date of the initial notice filing:

 (1) An issuer that has an effective registration statement under section 205 or 206 of the act (70 P.S. §§ 1-205 and 1-206) if an effective registration statement is on file with the Securities and Exchange Commission for the same securities.

 (2) An open-end or closed-end investment company, face amount certificate company or unit investment trust, as those persons are classified in sections 1—21 of the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80b-21), which, during the effective period of registration under section 205 or 206 of the act or the effective period of a notice filing sold securities in this Commonwealth in excess of the aggregate amount registered for sale in this Commonwealth under section 205 or 206 of the act or covered by the notice filing.

 (b) The Department will not grant an application filed on Form 210 if, at the time the application is filed with the Department, either of the following conditions exist:

 (1) A civil, criminal or administrative proceeding is pending alleging violations of section 201 of the act (70 P.S. § 1-201) for the sale of securities in this Commonwealth.

 (2) The securities were sold more than 24 months before the date Form 210 was filed with the Department.

 (c) An application filed on Form 210 shall be accompanied by a check made payable to the ''Commonwealth of Pennsylvania'' in an amount which equals the applicable oversale assessment in section 602.1(d) of the act (70 P.S. § 1-602.1(d)).

CHAPTER 211. FEDERALLY COVERED SECURITIES

§ 211.010. Notice filings for Federally covered securities.

 (a) 211(a) notice. The notices required under section 211(a) of the act (70 P.S. § 211(a)) to be filed by an open-end or closed-end investment company, unit investment trust or face amount certificate company, as those persons are classified in the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—[80a-65] 80a-64) (investment companies) [shall be made on] must be:

 (1) Completed by using the Uniform Investment Company Notice Filing Form (Form NF) [and shall be accompanied].

 (2) Accompanied by the applicable filing fees and administrative assessments in sections 602(b.1)(iv) and 602.1(a)(5) of the act (70 P.S. §§ 1-602(b.1)(iv) and 1-602.1(a)(5)).

 [(b) No documents filed by Investment Companies with the SEC need be filed with the notice described in subsection (a) except for those documents filed with the SEC relating to mergers, acquisitions or reorganizations. In that case, copies of registration statements, prospectuses or posteffective amendments filed with the SEC are required to be filed with the Commission at the time the notice required by subsection (a) is filed.

 (c) The notice required by section 211(b) of the act shall be filed with the Commission on Form D promulgated by the SEC and effective as of September 1, 1996, not later than 15-calendar days after the first sale of the Federally covered security in this Commonwealth and shall be accompanied by the filing fee in section 602(b.1)(vii) of the act.]

 (b) Exceptions.

 (1) The documents filed by an investment company with the Securities and Exchange Commission do not need to be filed with the notice described in subsection (a) except for those documents filed with the Securities and Exchange Commission relating to mergers, acquisitions or reorganizations.

 (2) If paragraph (1) requires the filing of documents, then an investment company shall file copies of the registration statements, prospectuses or posteffective amendments filed with the Securities and Exchange Commission with the Department at the time the notice required under subsection (a) is filed.

 (c) 211(b) notice. The notice required under section 211(b) of the act must be:

 (1) Filed with the Department on Form D promulgated by the Securities and Exchange Commission and effective as of September 1, 1996.

 (2) Filed not later than 15-calendar days after the first sale of the Federally covered security in this Commonwealth.

 (3) Accompanied by the filing fee in section 602(b.1)(vii) of the act.

 (d) Department orders. The Department may issue an order requiring the following with respect to a Federally covered security under section 18(b)(3) of the Securities Act of 1933 (15 U.S.C.A. § 77r(b)(3)):

 (1) The filing of documents filed with the Securities and Exchange Commission under the Securities Act of 1933 (15 U.S.C.A. §§ 77a—77aa) or any notice filing form that has been adopted by the Department.

 (2) The payment of fees prescribed to section 602(b.1) of the act.

Subpart C. REGISTRATION OF BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES AND NOTICE FILINGS BY [FEDERALLY-COVERED] FEDERALLY COVERED ADVISERS

CHAPTER 301. REGISTRATION REQUIREMENT

§ 301.020. Agent transfers.

 An agent who wishes to [terminate] end employment with one registered broker-dealer and thereafter [commence] begin employment with another registered broker-dealer may do so without causing a suspension in the agent's registration with the [Commission] Department if all of the following conditions are met:

 (1) Both the terminating and employing broker-dealers are members of [the National Association of Securities Dealers, Inc.] FINRA.

 (2) The transfer is effected in accordance with the terms, conditions and execution of Item 15 of the Uniform Application for Securities Industry Registration or Transfer (Form U-4).

CHAPTER 302. EXEMPTIONS

§ 302.060. [Dual registration of agents in certain instances] (Reserved).

 [A controlling person of two otherwise unaffiliated, registered broker-dealers simultaneously may be an agent of both the broker-dealers; provided that, during the period in which the person simultaneously is an agent:

 (1) The person's functions and activities on behalf of one broker-dealer are limited exclusively to dealings and transactions with issuers and involve no function or activity in any sales or offers of sales to investors of any securities.

 (2) Neither the person's functions and activities on behalf of the other broker-dealer nor the activities of the other broker-dealer involve the sale or offer of sale of a security of an issuer for whom the first broker-dealer conducted, or participated in the conduct of, a transaction at a time when the controlling person was the agent of the first broker-dealer.]

§ 302.061. Auctioneers exemption from broker-dealer and agent registration.

 (a) Under the authority contained in section 302(f) of the act (70 P.S. § 1-302(f)), the [Commission deems] Department considers it appropriate and in the public interest to exempt persons from the broker-dealer and agent registration provisions of section 301 of the act (70 P.S. § 1-301) if all of the following conditions are met:

 (1) The person meets one of the following conditions:

 (i) Is licensed as an auctioneer, apprentice auctioneer, auction company or auction house under the [Auctioneers and Auction Licensing Act (AALA)] Auctioneer Licensing and Trading Assistant Registration Act (ALTARA) (63 P.S. §§ 734.1—734.34).

 (ii) Is exempt from registration under section 3(h) of the [AALA] ALTARA (63 P.S. § 734.3(h)).

 (iii) Holds a special license to conduct an auction under section 3(i) of the [AALA] ALTARA.

 (2) The person effects transactions in securities solely at an ''auction'' or at a ''sale at auction'' as these terms are defined in the [AALA] ALTARA.

 (3) The person engages only in effecting transactions in securities at an auction or for sale at auction which constitute a ''nonissuer transaction'' as that term is defined in section 102(m) of the act (70 P.S. § 1-102(m)).

 (4) The person does not effect transactions in securities at an auction or for sale at auction more than three times in any consecutive period of 24 months.

 (5) The person and any affiliate of the person currently is not subject or, within the past 10 years, was not subject to any of the following:

 (i) An order described in section 305(a)(iv) of the act (70 P.S. § 1-305(a)(iv)).

 (ii) An injunction described in section 305(a)(iii) of the act.

 (iii) A criminal conviction described in section 305(a)(ii) of the act.

 (iv) An order of the [Commission] Department issued under section 512 of the act (70 P.S. § 1-512).

 (v) A court order finding civil contempt under section 509(c) of the act (70 P.S. § 1-509(c)).

 (vi) An order of the [Commission] Department imposing an administrative assessment under section 602.1 of the act (70 P.S. § 1-602.1) which has not been paid in full.

 (b) [Solely for purposes of subsection (a)(3), a transaction where a bank, as that term is defined in section 102(d) of the act (70 P.S. § 1-102(d)), acting as a fiduciary under a trust agreement, estate administration or other similar relationship, causes the bank's securities to be offered and sold at auction from such accounts shall be deemed to be a nonissuer transaction.] For the purposes of subsection (a)(3), a transaction is considered a nonissuer transaction if a bank, as that term is defined in section 102(d) of the act, does the following:

 (1) Acts as a fiduciary under a trust agreement, estate administration or other similar relationship.

 (2) Causes the bank's securities to be offered and sold at action from the accounts described in subsection (b)(1).

§ 302.063. Financial institutions exempt from broker-dealer and agent registration.

 [(a)] Under section 302(f) of the act (70 P.S. § 1-302(f)), the [Commission deems] Department considers it appropriate and in the public interest to exempt financial institutions and individuals representing financial institutions from the broker-dealer and agent registration provisions of section 301 of the act (70 P.S. § 1-301), if the activities of the financial institution and individuals representing the financial institutions are conducted under a networking arrangement or brokerage affiliate arrangement.

 [(b) For purposes of this section, the following terms have the following meanings:

 Financial institution—A Federal or State chartered bank, savings and loan association, savings bank or credit union and any service corporation affiliated with these entities.

 Networking arrangement or brokerage affiliate arrangement—A contractual arrangement between a broker-dealer registered under section 301 of the act and a financial institution whereby the broker-dealer effects transactions in securities for the account of customers of the financial institution and the general public which transactions are effected on, or emanate from, the premises of a financial institution.]

§ 302.064. Stock Exchange exemption from agent registration.

 Under the authority contained in section 302(f) of the act (70 P.S. § 1-302(f)), the [Commission deems] Department considers it appropriate and in the public interest to exempt agents from the registration provisions of section 301 of the act (70 P.S. § 1-301), if all the following requirements are met:

 (1) The agent is representing a broker-dealer which [meets the following requirements] is:

 (i) Registered under section 301 of the act.

 (ii) A member of a National securities exchange registered with the [United States] Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—[78kk] 78pp).

 (2) The agent's only customers are broker-dealers registered with the [United States] Securities and Exchange Commission under the Securities Exchange Act of 1934 or section 301 of the act.

 (3) The agent is not subject to [a] either of the following:

 (i) A currently effective order under section 305 of the act (70 P.S. § 1-305) denying, suspending, conditioning or revoking registration [or an order of the Commission].

 (ii) A currently effective order of the Department issued under section 512 of the act (70 P.S. § 1-512).

§ 302.065. Canadian broker-dealer exempt.

 Under section 302(f) of the act (70 P.S. § 1-302(f)), the [Commission deems] Department considers it appropriate and in the public interest to exempt Canadian broker-dealers and agents representing Canadian broker-dealers from the broker-dealer and agent registration provisions of section 301 of the act (70 P.S. § 1-301) when effecting transactions in securities in this Commonwealth with persons described in paragraph (1), if the broker-dealer meets the conditions of paragraph (2).

 (1) The customer is one of the following:

 (i) A person from Canada who temporarily is present in this Commonwealth with whom the Canadian broker-dealer had a bona fide business-customer relationship before the person entered this Commonwealth.

 (ii) A person from Canada who is present in this Commonwealth whose only transactions with a Canadian broker-dealer in this Commonwealth relate to a self-directed, tax advantaged retirement plan in Canada as to which the person is the holder or contributor.

 (2) The Canadian broker-dealer meets the following conditions:

 (i) Is a member in good standing of a self-regulatory organization or stock exchange in Canada at the time it is effecting transactions into this Commonwealth in reliance on this section.

 (ii) Is registered as a broker or dealer in good standing in the [Province or Territory] province or territory of Canada from which it is effecting transactions into this Commonwealth in reliance on this section.

 (iii) Discloses to its customers in this Commonwealth at the time of a transaction made in reliance on this section that it is not registered under the act.

 (Editor's Note: Sections 302.070 and 302.071 are new and printed in regular type to enhance readability.)

§ 302.070. Registration exemption for investment advisers to private funds.

 (a) Exemption for private fund advisers. Subject to the additional requirements of subsection (b), a private fund adviser is exempt from the registration requirements of section 301(c) of the act (70 P.S. § 1-301(c)) if the private fund adviser satisfies the following conditions:

 (1) The private fund adviser and any of its advisory affiliates are not subject to a disqualification as described in Rule 262 of Securities and Exchange Commission Regulation A (17 CFR 230.262) (relating to disqualification provisions).

 (2) The private fund adviser files with the Department each report and amendment that an exempt reporting adviser is required to file with the Securities and Exchange Commission under Securities and Exchange Commission Rule 204-4 (17 CFR 275.204-4) (relating to reporting by exempt reporting advisers).

 (b) Additional requirements for private fund advisers to certain 3(c)(1) funds. To qualify for the exemption described in subsection (a), a private fund adviser who advises at least one (3)(c)(1) fund that is not a venture capital fund shall also:

 (1) Advise only those 3(c)(1) funds, other than venture capital funds, whose outstanding securities other than short-term paper are beneficially owned entirely by persons who would each meet the definition of ''qualified client'' in Securities and Exchange Commission Rule 205-3 (17 CFR 275.205-3) (relating to exemption from the compensation prohibition of section 205(a)(1) for investment advisers), at the time the securities are purchased from the issuer.

 (2) Disclose, at the time of purchase, the following in writing to each beneficial owner of a 3(c)(1) fund that is not a venture capital fund:

 (i) Services, if any, to be provided to individual beneficial owners.

 (ii) Duties, if any, the investment adviser owes to the beneficial owners.

 (iii) Any other material information affecting the rights or responsibilities of the beneficial owners.

 (3) Obtain on an annual basis audited financial statements of each 3(c)(1) fund that is not a venture capital fund and deliver a copy of the audited financial statements to each beneficial owner of the fund.

 (c) Federally covered investment advisers. If a private fund adviser is registered with the Securities and Exchange Commission, the adviser is not eligible for this exemption and shall comply with the State notice filing requirements applicable to Federally covered investment advisers in section 303(a)(iii) of the act (70 P.S. § 1-303(a)(iii)).

 (d) Investment adviser representatives. A person is exempt from the registration requirements of section 301(c) of the act if the person:

 (1) Is employed by or associated with an investment adviser that is exempt from registration in this Commonwealth under this section.

 (2) Does not otherwise act as an investment adviser representative.

 (e) Electronic filing.

 (1) A private fund adviser shall file the report filings described in subsection (a)(2) electronically through the IARD.

 (2) The Department will consider a report filed when the report and the fee required under section 602.1 of the act (70 P.S. § 1-602.1) are filed and accepted by the IARD on the Department's behalf.

 (f) Transition. If an investment adviser becomes ineligible for the exemption provided in this section, the investment adviser shall comply with all applicable laws and rules requiring registration or notice filing within 90 days from the date the investment adviser's eligibility for this exemption ceases.

 (g) Grandfathering for investment advisers to 3(c)(1) funds with nonqualified clients. An investment adviser to a 3(c)(1) fund, other than a venture capital fund, that has one or more beneficial owners who are not qualified clients as described in subsection (b)(1) is eligible for the exemption contained in subsection (a) if the following conditions are satisfied:

 (1) The subject fund existed before the effective date of this section.

 (2) The subject fund ceases to accept beneficial owners who are not qualified clients, as described in subsection (b)(1), as of the effective date of this section.

 (3) The investment adviser discloses in writing the information described in subsection (b)(2) to all beneficial owners of the fund.

 (4) The investment adviser delivers audited financial statements as required under subsection (b)(3) as of the effective date of this section.

 (h) Scope. This section does not supersede an applicable exclusion from the definition of ''investment adviser'' or ''exemption from registration for an investment adviser'' in the act.

§ 302.071. Registration exemption for solicitors.

 A solicitor does not need to register as an investment adviser or investment adviser representative if the solicitor:

 (1) Is in compliance with all requirements of § 404.012 (relating to cash payment for client solicitation).

 (2) Provides impersonal investment advisory services.

 (3) Is not subject to any order, judgment or decree described in section 305(a)(ii)—(vi) of the act (70 P.S. § 1-305(a)(ii)—(vi)).

CHAPTER 303. REGISTRATION PROCEDURE

§ 303.011. Broker-dealer registration procedures.

 [(a) An application for initial registration as a broker-dealer shall contain the information requested in and shall be made on Uniform Application for Broker-Dealer Registration (Form BD), or a successor form, and shall be made in the following manner:

 (1) An applicant which is not a member of the National Association of Securities Dealers, Inc. (NASD) or a member of a National securities exchange registered with the United States Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—78kk) shall complete and file one copy of Form BD with the Commission accompanied by the requisite filing fee required by section 602(d.1) of the act (70 P.S. § 1-602(d.1)), the compliance assessment required by section 602.1(a)(3) of the act (70 P.S. § 1-602.1(a)(3)), and financial statements in the form required by subsections (b) and (c).

 (2) An applicant which is not a member of the NASD but is a member of a National securities exchange registered with the SEC under the Securities Exchange Act of 1934 shall complete and file one copy of Form BD with the Commission accompanied by the requisite filing fee required by section 602(d.1) of the act and the compliance assessment required by section 602.1(a)(3) of the act.

 (3) An applicant which is a member of NASD shall file Form BD in the manner set forth in § 603.011(f) (relating to filing requirements) accompanied by the filing fee required by section 602(d.1) of the act and the compliance assessment required by section 602.1(a)(3) of the act.

 (b) Except for applicants described in subsections (a)(2) and (3), every application shall be accompanied by a statement of the financial condition of the applicant prepared in accordance with generally accepted accounting principles and accompanied by an auditor's report containing an unqualified opinion of an independent certified public accountant. The audited statement of financial condition shall be as of the end of the applicant's most recent fiscal year, or the preceding fiscal year if the statement of financial condition for the most recently ended fiscal year is unavailable and if the application is filed within 14 months of the end of the preceding fiscal year. If the date of the most recent audited statement of financial condition is more than 45 days prior to the date of filing, the applicant also shall file an unaudited statement of financial condition as of a date within 45 days of the date of filing. As a part of the statement, the Commission may require the filing of separate schedules:

 (1) Listing the securities owned by the applicant valued at the market.

 (2) Stating material contractual commitments of the applicant not otherwise reflected in the statements.

 (c) Except for applicants described in subsections (a)(2) and (3), an applicant that has commenced to act as a broker-dealer, the audited statement of financial condition shall be accompanied by an audited statement of income as of the end of the applicant's most recent fiscal year, or the preceding fiscal year if the statement of income for the most recently ended fiscal year is unavailable and if the application is filed within 14 months of the end of the preceding fiscal year.

 (d) An applicant described in subsection (a)(2) or (3) shall provide the Commission, within 5 days of receipt of a written or electronic request, a copy of any financial statement or financial information required by SEC rules or the rules of a National securities association or National securities exchange registered with the SEC of which the applicant is a member.

 (e) A broker-dealer registered under the act shall take steps necessary to ensure that material information contained in its Form BD remains current and accurate. If a material statement made in Form BD becomes incorrect or inaccurate, the broker-dealer shall file with the Commission an amendment on Form BD within 30 days of the occurrence of the event which required the filing of the amendment.]

 (a) An applicant for initial registration as a broker-dealer shall complete a Uniform Application for Broker-Dealer Registration (Form BD), or a successor form.

 (b) An applicant which is not a member of FINRA or a member of a National securities exchange registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—78pp) shall complete and file with the Department:

 (1) A copy of Form BD.

 (2) The filing fee required under section 602(d.1) of the act (70 P.S. § 1-602(d.1)).

 (3) The compliance assessment required under section 602.1(a)(3) of the act (70 P.S. § 1-602.1(a)(3)).

 (4) Financial statements in the form required under subsections (e), (f) and (g).

 (c) An applicant which is not a member of FINRA but is a member of a National securities exchange registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 shall complete and file with the Department:

 (1) A copy of Form BD.

 (2) The filing fee required under section 602(d.1) of the act.

 (3) The compliance assessment required under section 602.1(a)(3) of the act.

 (d) An applicant which is a member of FINRA shall file with the Department:

 (1) Form BD in the manner set forth in § 603.011(f) (relating to filing requirements).

 (2) The filing fee required under section 602(d.1) of the act.

 (3) The compliance assessment required under section 602.1(a)(3) of the act.

 (e) Except for applicants described in subsections (c) and (d), applicants shall file a statement of the financial condition of the applicant which meets the following conditions:

 (1) The statement is prepared in accordance with generally accepted accounting principles.

 (2) The statement is accompanied by an auditor's report containing an unqualified opinion of an independent certified public accountant, which is as of either of the following:

 (i) The end of the applicant's most recent fiscal year.

 (ii) The preceding fiscal year if:

 (A) The statement of financial condition for the most recently ended fiscal year is unavailable.

 (B) The application is filed within 14 months of the end of the preceding fiscal year.

 (f) Except for applicants described in subsections (c) and (d), if the date of the most recent audited statement of financial condition is more than 45 days before the date of filing, the applicant also shall file an unaudited statement of financial condition as of a date within 45 days of the date of filing which the Department may require include the filing of separate schedules:

 (1) Listing the securities owned by the applicant valued at the market.

 (2) Stating material contractual commitments of the applicant not otherwise reflected in the statements.

 (g) Except for applicants described in subsections (c) and (d), if an applicant has commenced to act as a broker-dealer, the audited statement of financial condition shall be accompanied by an audited statement of income which is as of either of the following:

 (1) The end of the applicant's most recent fiscal year.

 (2) The preceding fiscal year if:

 (i) The statement of income for the most recently ended fiscal year is unavailable.

 (ii) The application is filed within 14 months of the end of the preceding fiscal year.

 (h) An applicant described in subsections (c) and (d) shall provide to the Department, within 5 days of receipt of a written or electronic request, a copy of any financial statement or financial information required under the Securities and Exchange Commission rules or the rules of a National securities association or National securities exchange registered with the Securities and Exchange Commission of which the applicant is a member.

 (i) A broker-dealer registered under the act shall take steps necessary to ensure that material information contained in its Form BD remains current and accurate. If a material statement made in Form BD becomes incorrect or inaccurate, the broker-dealer shall file with the Department an amendment on Form BD within 30 days of the occurrence of the event which required the filing of the amendment.

§ 303.012. Investment adviser registration procedure.

 (a) An [application] applicant for initial registration as an investment adviser shall [contain the information requested in and shall be made on the] complete a Uniform Application for Investment Adviser Registration (Form ADV), or a successor form.

 (b) The applicant shall complete and file with the [Commission] Department or with an investment adviser registration depository designated by [order of the Commission one copy of the form accompanied by the filing fee in] the Department:

 (1) Form ADV.

 (2) The filing fee required under section 602(d.1) of the act (70 P.S. § 1-602(d.1))[, the].

 (3) The compliance assessment in section 602.1(a)(4) of the act [and any exhibits required by this section].

 (4) Any exhibits required under this section.

 [(b)] (c) Except as set forth in subsection [(f), the following statements of financial condition shall accompany an application for initial registration as an investment adviser:] (j), an applicant having custody of client funds or securities or requiring payment of advisory fees 6 months or more in advance and in excess of $1,200 per client shall file:

 (1) An [applicant that has custody of client funds or securities or an applicant that requires payment of advisory fees 6 months or more in advance and in excess of $1,200 per client shall file an] audited balance sheet of the applicant prepared in accordance with generally accepted accounting principles [and accompanied by a] which is as of the end of the applicant's most recent fiscal year.

 (2) A standard audit report containing an unqualified opinion of an independent certified public accountant[. The] within which the accountant shall submit, as a supplementary opinion, comments based [upon] on the audit as to [material] the:

 (i) Material inadequacies found to exist in the accounting system[, the internal accounting controls and the procedures].

 (ii) Internal accounting controls.

 (iii) Procedures for safeguarding securities and funds [and shall indicate] with an indication of corrective action taken or proposed. [The balance sheet required by this paragraph shall be as of the end of the applicant's most recent fiscal year. If that balance sheet is as of a date more than 45 days prior to the date of filing the application, the applicant also shall file a subsequent balance sheet prepared in accordance with generally accepted accounting principles as of a date within 45 days of the date of filing. This balance sheet may be unaudited and may be prepared by management of the applicant.

 (2) An applicant that has discretionary authority over client funds or securities, but not custody, shall file a balance sheet which need not be audited but shall be prepared in accordance with generally accepted accounting principles. The balance sheet required by this paragraph shall be as of the end of the applicant's most recent fiscal year. If that balance sheet is as of a date more than 45 days prior to the date of filing the application, the applicant also shall file a subsequent balance sheet, which must be prepared in accordance with generally accepted accounting principles as of a date within 45 days of filing the application. Each balance sheet required by this paragraph may be unaudited and prepared by management of the applicant. Each balance sheet required by this paragraph also shall contain a representation by the applicant that the balance sheet is true and accurate.

 (3) An applicant whose proposed activities do not come within paragraph (1) or (2) need not file a statement of financial condition.]

 (3) A subsequent balance sheet, if the balance sheet required under paragraph (1) is of a date more than 45 days before the filing date of the application:

 (i) The subsequent balance sheet must be:

 (A) Prepared in accordance with generally accepted accounting principles.

 (B) Dated as of a date within 45 days of the filing date of the application.

 (ii) The subsequent balance sheet may be unaudited and prepared by management of the applicant.

 (d) The balance sheet required under subsection (c) does not need to be filed if the investment adviser has custody of client funds or securities solely as a result of either of the following:

 (1) The investment adviser receives fees directly deducted from clients' funds or securities in compliance with § 303.042(a)(3)(i) (relating to investment adviser capital requirements).

 (2) The investment adviser serves as a general partner, manager of a limited liability company or occupies a similar status or performs a similar function which gives the investment adviser or its supervised person legal ownership or access to client funds or securities, if the investment adviser is in compliance with § 303.042(a)(3)(ii).

 (e) Except as set forth in subsection (j), an applicant that has discretionary authority over client funds or securities, but not custody, shall file:

 (1) A balance sheet prepared in accordance with generally accepted accounting principles which is as of the end of the applicant's most recent fiscal year.

 (2) A subsequent balance sheet prepared in accordance with generally accepted accounting principles and dated within 45 days of the filing date if the balance sheet required under paragraph (1) is dated more than 45 days before the filing date of the application.

 (f) The balance sheets required under subsection (e)(1) and (2):

 (1) May be unaudited and prepared by management of the applicant.

 (2) Shall contain a representation by the applicant that the balance sheet is true and accurate.

 (g) Except as set forth in subsection (j), an applicant whose proposed activities do not come within subsection (c) or (e) does not need to file a statement of financial condition.

 [(c)] (h) As part of the requirements relating to the statements of financial condition set forth in [subsection (b), the Commission] subsections (c) and (e), the Department may require the following:

 (1) A list of the securities reflected in the statement of financial condition of the applicant valued at the market.

 (2) A description of material contractual commitments of the applicant not otherwise reflected in the statement of financial condition.

 (3) [In the case of a sole proprietor, whose statement of financial condition includes only those assets and liabilities used in the applicant's investment adviser business, an] An affirmative statement by the applicant that its liabilities which have not been incurred in the course of business as an investment adviser are not greater than the applicant's assets not used in its investment adviser business if the applicant is a sole proprietor, whose statement of financial condition includes only those assets and liabilities used in the applicant's investment adviser business.

 [(d)] (i) An investment adviser registered under the act shall take steps necessary to ensure that material information contained in its Form ADV and exhibits remains current and accurate. If a material statement made in Form ADV and exhibits becomes incorrect or inaccurate the investment adviser shall file with the [Commission] Department an amendment on Form ADV within 30 days of the occurrence of the event which requires the filing of the amendment.

 [(e) For purposes of this section, the following terms have the following meanings:

 Principal place of business—The meaning set forth in 17 CFR 275.203A-3(c) (relating to definitions) promulgated under the Investment Advisers Act of 1940 (15 U.S.C.A. §§ 80b-1—80b-21).

 (f)] (j) An applicant that maintains its principal place of business in a state other than this Commonwealth [need not comply with subsection (b) if the applicant meets the following] does not need to comply with subsections (c) and (e) if the applicant:

 (1) Is registered as an investment adviser 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 the assets of any client residing in this Commonwealth at any time during the preceding 12-month period.

§ 303.013. Agent registration procedures.

 (a) An [application] applicant for initial registration as an agent of a broker-dealer or issuer shall [contain the information requested in and shall be made on] complete a Uniform Application for Securities Industry Registration or Transfer (Form U-4) or a successor form. [Except as provided in subsection (b), the agent and the broker-dealer or issuer shall complete and file with the Commission one copy of Form U-4 and exhibits thereto accompanied by the filing fee required by section 602(d.1) of the act (70 P.S. § 1-602(d.1)), the compliance assessment required by section 602.1(a)(1) of the act (70 P.S. § 1-602.1(a)(1)) and evidence of passage of the examinations required by § 303.031 (relating to examination requirements for agents).]

 (b) Except as provided in subsection (c), the agent and the broker-dealer or issuer shall complete and file with the Department:

 (1) Form U-4 and exhibits.

 (2) The filing fee required under section 602(d.1) of the act (70 P.S. § 1-602(d.1)).

 (3) The compliance assessment required under section 602.1(a)(1) of the act (70 P.S. § 1-602.1(a)(1)).

 (4) Evidence of passage of the examinations required under § 303.031 (relating to examination requirement for agents).

 [(b)] (c) An applicant for registration as an agent of a broker-dealer which is a member firm of [the National Association of Securities Dealers (NASD)] FINRA shall file the following items in the manner set forth in § 603.011(f) (relating to filing requirements):

 (1) A completed and executed Form U-4 and exhibits [thereto].

 (2) The filing fee required [by] under section 602(d.1) of the act.

 (3) The compliance assessment required [by] under section 602.1(a)(1) of the act.

 (4) Evidence of passage of the examinations required [by] under § 303.031.

 [(c)] (d) An agent and broker-dealer or issuer shall take necessary steps to ensure that material information contained in Form U-4 remains current and accurate. If a material statement made in the Form U-4 becomes incorrect or inaccurate, the agent and broker-dealer or issuer shall file with the [Commission] Department an amendment to Form U-4 within 30 days of the occurrence of the event which requires the filing of the amendment.

§ 303.014. Investment adviser representative registration procedures.

 (a) An [application] applicant for initial registration as an investment adviser representative of an investment adviser or [Federally-covered adviser shall contain the information requested in and shall be made on the] Federally covered adviser shall complete a Uniform Application for Securities Industry Registration or Transfer Form (Form U-4), or a successor form.

 (b) The investment adviser representative and the investment adviser or Federally covered adviser shall complete and file with the [Commission] Department or with an investment adviser registration depository designated by [order of the Commission one copy of Form U-4 and exhibits thereto accompanied by the filing fee required by section 602(d.1) of the act (70 P.S. § 1-602(d.1)), the compliance assessment required by section 602.1(a)(1) of the act (70 P.S. § 1-602.1(a)(1)) and the results evidencing passage of the examinations required by § 303.032 (relating to qualification of and examination requirement for investment advisers and investment adviser representatives).] the Department:

 (1) Form U-4 and exhibits.

 (2) The filing fee required under section 602(d.1) of the act (70 P.S. § 1-602(d.1)).

 (3) The compliance assessment required under section 602.1(a)(1) of the act (70 P.S. § 1-602.1(a)(1)).

 (4) The results evidencing passage of the examinations required under § 303.032 (relating to examination requirements for investment advisers and investment adviser representatives).

 [(b)] (c) An investment adviser representative and an investment adviser or [Federally-covered] Federally covered adviser shall take necessary steps to ensure that material information contained in Form U-4 remains current and accurate. If a material statement made in the Form U-4 becomes incorrect or incomplete, the investment adviser representative and the investment adviser or [Federally-covered] Federally covered adviser shall file with the [Commission] Department an amendment to Form U-4 within 30 days of the occurrence of the event which requires the filing of the amendment.

§ 303.015. Notice filing for [Federally-covered] Federally covered advisers.

 [(a) Initial filing. The notice required to be filed by Federally-covered advisers under section 303(a)(iii) of the act (70 P.S. § 1-303(a)(iii)) shall be the uniform application for investment adviser registration (Form ADV) or successor form thereto as filed with the United States Securities and Exchange Commission. Prior to the Federally-covered adviser conducting advisory business in this Commonwealth, a completed Form ADV accompanied by the notice filing fee required by section 602(d.1) of the act (70 P.S. § 1-602(d.1)) shall be filed with the Commission or with an investment adviser registration depository designated by order of the Commission.

 (b) Renewals. Every Federally-covered adviser conducting advisory business in this Commonwealth annually shall pay a notice filing fee set forth in section 602(d.1) of the act. Payment of the notice filing fee should be made directly with the Commission or with an investment adviser registration depository designated by order of the Commission.]

 (a) Format. Federally covered advisers required to file notice under section 303(a)(iii) of the act (70 P.S. § 1-303(a)(iii)) shall file the uniform application for investment adviser registration, Form ADV or successor form as filed with the Securities and Exchange Commission.

 (b) Initial filing. Before the Federally covered adviser conducts advisory business in this Commonwealth, the Federally covered adviser shall file a completed Form ADV accompanied by the notice filing fee required under section 602(d.1) of the act (70 P.S. § 1-602(d.1)) with the Department or with an investment adviser registration depository designated by the Department.

 (c) Renewals. Every Federally covered adviser conducting advisory business in this Commonwealth annually shall pay a notice filing fee set forth in section 602(d.1) of the act to the Department or to an investment adviser registration depository designated by the Department.

 (Editor's Note: The following section is new and printed in regular type to enhance readability.)

§ 303.016. Considered as abandoned.

 (a) General rule. The Department may consider as abandoned an application for registration as a broker-dealer, agent, investment advisor or investment advisor representative which has been on file with the Department for a minimum of 6 consecutive months if the applicant failed to do any of the following:

 (1) Respond within 60 days after written notice sent by first class mail to the applicant's last known address in the Department's files warning the applicant that the application will be considered abandoned.

 (2) Respond to any request for additional information required under the act.

 (3) Complete the showing required for action on the application.

 (b) Voluntary withdrawal. An applicant may, with the consent of the Department, withdraw an application at any time.

 (c) No refund of fee. On abandonment or voluntary withdrawal, there will not be a refund for any filing fee paid before the date of the abandonment or withdrawal.

§ 303.021. Registration and notice filing procedures for successors to a broker-dealer, investment adviser or [Federally-covered] Federally covered adviser.

 [(a) The following apply with respect to broker-dealers:

 (1) When a broker-dealer is formed or proposed to be formed for the purpose of succeeding to, and continuing the business of, a broker-dealer registered under section 301 of the act (70 P.S. § 1-301) and as a broker or dealer under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C.A. § 77o(b)) (successor broker-dealer) based solely on a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor broker-dealer shall comply with the requirements of SEC Rule 15b1-3(a) promulgated under the Securities Exchange Act of 1934, except that the successor broker-dealer shall file the amendments to Form BD with the Commission.

 (2) When a broker-dealer is formed or proposed to be formed for the purpose of succeeding to, and continuing the business of, a broker-dealer registered under section 301 of the act and as a broker or dealer under section 15(b) of the Securities Exchange Act of 1934 (successor broker-dealer) for reasons other than a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor broker-dealer shall comply with the requirements of SEC Rule 15b1-3(b) promulgated under the Securities Exchange Act of 1934, except that the successor shall file Form BD with the Commission.

 (b) The following shall apply to investment advisers:

 (1) When an investment adviser is formed or proposed to be formed for the purpose of succeeding to, and continuing the business of, an investment adviser registered under section 301 of the act (successor investment adviser) based solely on a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor investment adviser may file an initial application for registration by amending Form ADV of the predecessor and, under section 303(b) of the act (70 P.S. § 1-303(b)), succeed to the unexpired portion of the predecessor's term of registration.

 (2) When an investment adviser is formed or proposed to be formed for the purpose of succeeding to, and continuing the business of, an investment adviser registered under section 301 of the act for reasons other than a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor investment adviser shall file Form ADV with the Commission. Upon registration, the successor investment adviser, under section 303(b) of the act, shall succeed to the unexpired portion of the predecessor's term of registration.

 (c) When a Federally covered adviser is formed or proposed to be formed for the purpose of succeeding to, and continuing the business of, a registered investment adviser or of another Federally-covered adviser (successor Federally-covered adviser), the successor Federally-covered adviser shall file with the Commission either Form ADV or an amendment to Form ADV as required under SEC Release No. IA-1357 (December 28, 1992) and, under section 303(b) of the act, shall succeed to the unexpired portion of the predecessor's notice period.]

 (a) If a broker-dealer is formed or proposed to be formed to succeed to, and continue the business of, a broker-dealer registered under section 301 of the act (70 P.S. § 1-301) and as a broker or dealer under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C.A. § 77o(b)) (successor broker-dealer), and the decision is for either of the following reasons:

 (1) Based solely on a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor broker-dealer shall comply with the requirements of Rule 15b1-3(a) promulgated under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—78pp), except that the successor broker-dealer shall file the amendments to Form BD with the Department.

 (2) For reasons other than a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor broker-dealer shall comply with the requirements of Rule 15b1-3(b) promulgated under the Securities Exchange Act of 1934, except that the successor shall file Form BD with the Department.

 (b) If an investment adviser is formed or proposed to be formed to succeed to, and continue the business of, an investment adviser registered under section 301 of the act (successor investment adviser), and the decision is for either of the following reasons:

 (1) Based solely on a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor investment adviser shall:

 (i) File an initial application for registration by amending Form ADV of the predecessor.

 (ii) Succeed to the unexpired part of the predecessor's term of registration under section 303(b) of the act (70 P.S. § 1-303(b)).

 (2) For reasons other than a change in the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor investment adviser shall:

 (i) File Form ADV with the Department.

 (ii) Succeed to the unexpired part of the predecessor's term of registration, after registration under section 303(b) of the act.

 (c) If a Federally covered adviser is formed or proposed to be formed to succeed to, and continue the business of, a registered investment adviser or of another Federally covered adviser, the successor Federally covered adviser shall:

 (1) File with the Department either Form ADV or an amendment to Form ADV as required under Securities and Exchange Commission Release No. IA-1357 (December 28, 1992) and, under section 303(b) of the act.

 (2) Succeed to the unexpired part of the predecessor's notice period.

§ 303.031. Examination requirement for agents.

 (a) An individual may not be registered as an agent under the act unless the individual [has met] meets the requirements of subsections (b) and (c).

 (b) The applicant [has received] receives a passing grade on the securities examination for principals or registered representatives administered by [the National Association of Securities Dealers, Inc., the New York Stock Exchange or the United States] FINRA or the Securities and Exchange Commission within 2 years [prior to] before the date of filing an application for registration. [An applicant will be deemed to have met the requirements] The Department considers the requirements of this subsection met if any of the following apply:

 [(i)] (1) The applicant previously has passed the examination and has not had a lapse in employment with a broker-dealer for a period exceeding 2 years.

 [(ii)] (2) The applicant has received a waiver of the examination requirement by [the NASD] FINRA.

 [(iii)] (3) The applicant has received [a Commission order] notice from the Department waiving the examination requirement.

 (c) The applicant [has received] receives a passing grade on the Uniform Securities Agent State Law Examination (Series 63) or[, alternatively,] the Uniform Combined State Law Examination (Series 66) and the General Securities Representative Examination (Series 7) or successor examination administered by [the NASD within 2 years prior to] FINRA within 2 years before the date of filing an application for registration. [An applicant will be deemed to have met] The Department considers the requirements of this subsection met if any of the following apply:

 [(i)] (1) The applicant previously has passed the Series 63 or[, alternatively,] the Series 66 and Series 7, and has not had a lapse in employment with a broker-dealer for a period exceeding 2 years.

 [(ii)] (2) The applicant has received [a Commission order] notice from the Department waiving the requirement to take the Series 63 or[, alternatively,] the Series 66 and Series 7.

§ 303.032. Examination requirements for investment advisers and investment adviser representatives.

 (a) Examination requirements. [An individual may not] To be registered as an investment adviser or investment adviser representative under the act [unless the person has met one of the following qualifications], an individual shall meet one of the following examination requirements:

 (1) [Received] The individual, on or after January 1, 2000, and within 2 years immediately [prior to] before the date of filing an application with the [Commission,] Department, received a passing grade on The Uniform Investment Adviser Law Examination (Series 65), or successor examination.

 (2) [Received] The individual, on or after January 1, 2000, and within 2 years immediately [prior to] before the date of filing an application with the [Commission,] Department, received a passing grade on the:

 (i) General Securities Representative Examination (Series 7) administered by [the National Association of Securities Dealers , Inc. and the] FINRA.

 (ii) Uniform Combined State Law Examination (Series 66) or successor examinations.

 (3) [Received] The individual, on or after January 1, 2000[,]:

 (i) Received a passing grade on either the Series 65 examination or passing grades on both the Series 7 and Series 66 examinations [and has].

 (ii) Has not had a lapse in registration as an investment adviser or investment adviser representative in any state other than this Commonwealth for a period exceeding 2 years immediately [prior to] before the date of filing an application with the [Commission] Department.

 (b) Grandfathering.

 (1) Compliance with subsection (a) is waived if the individual meets the following [qualifications] conditions:

 (i) [Prior to January 1, 2000, the individual had] The individual, before January 1, 2000, received a passing grade on the Series 2, 7, 8 or 24 examination for registered representatives or supervisors administered by [the National Association of Securities Dealers, Inc.] FINRA and the Series 65 or Series 66 examinations.

 (ii) The individual has not had a lapse in employment as an investment adviser, investment adviser representative, or principal or agent of a broker-dealer for any consecutive period exceeding 2 years immediately preceding the date of filing an application with the [Commission] Department.

 (2) [An individual need not comply] Compliance with subsection (a) is waived if the individual meets the following [qualifications] conditions:

 (i) [Prior to January 1, 2000, the individual] The individual, before January 1, 2000, was registered as an investment adviser or investment adviser representative in any state requiring the licensing, registration or qualification of investment advisers or investment adviser representatives.

 (ii) The individual has not had a lapse in registration as an investment adviser or investment adviser representative in another state for any consecutive period exceeding 2 years immediately preceding the date of filing an application with the [Commission] Department.

 (c) Waivers of exam requirements. Compliance with subsection (a) is waived if:

 (1) The individual meets the following [qualifications] conditions:

 (i) [Has no] The individual does not have a disciplinary history which requires an affirmative response to Items 23A-E or Item 23H of The Uniform Application for Securities Industry Registration or Transfer (Form U-4) or successor items thereto.

 (ii) [Has] The individual has been awarded any of the following designations which, at the time of filing of the application with the [Commission] Department, is current and in good standing:

 (A) Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards, Inc.

 (B) Chartered Financial Consultant (ChFC) or Master of Science and Financial Services (MSFS) awarded by the American College, Bryn Mawr, Pennsylvania.

 (C) Chartered Financial Analyst (CFA) awarded by the Institute of Chartered Financial Analysts.

 (D) Personal Financial Specialist (PFS) awarded by the American Institute of Certified Public Accountants.

 (E) Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc.

 (2) The individual is licensed as a certified public accountant, is currently in good standing and [has no] does not have a disciplinary history that requires an affirmative response to Items 14A-E or Item 14H of Form U-4 or successor items thereto, and has notified the [Commission] Department that the individual is eligible for a waiver of the examination requirement imposed by subsection (a).

 (3) The individual is licensed as an attorney, is currently in good standing and [has no] does not have a disciplinary history that requires an affirmative response to Items 14A-E or Item 14H of Form U-4 or successor items thereto, and has notified the [Commission] Department that the individual is eligible for a waiver of the examination requirement imposed by subsection (a).

 (4) The individual has received [an order from the Commission waiving] a waiver from the Department regarding compliance with subsection (a).

§ 303.041. Broker-dealer capital requirements.

 (a) Except as set forth in subsection (e), every broker-dealer registered under section 301 of the act (70 P.S. § 1-301) shall maintain net capital of $25,000[. The] with an aggregate indebtedness [of a registered broker-dealer may not exceed] not exceeding 1500% of its net capital. For purposes of this section, the terms ''net capital'' and ''aggregated indebtedness'' have the meanings set forth in Rule 15c3-1 (17 CFR 240.15c3-1) (relating to net capital requirements for brokers [and] or dealers) promulgated under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—[78mm] 78pp).

 (b) As a condition of the right to continue to transact business, every broker-dealer registered under the act that is not registered as a broker-dealer with the [United States] Securities and Exchange Commission [(SEC)] under the Securities Exchange Act of 1934 immediately shall notify the [Commission] Department if the broker-dealer's aggregate indebtedness exceeds 1500% of its net capital or if its total net capital is less than the minimum required.

 (c) Within 24 hours after transmitting the notice required under subsection (b), the broker-dealer shall file a report of its financial condition with the [Commission] Department including the following:

 (1) A proof of money balances of ledger accounts in the form of a trial balance.

 (2) A computation of net capital and aggregate indebtedness as those terms are used in this section and a computation of the ratio of aggregate indebtedness to net capital.

 (3) An analysis of the aggregate market value of fully paid securities in customers' security accounts which are not segregated.

 (4) A proof of ledger net credit balances of moneys borrowed from banks, trust companies and from other financial institutions, and from others, which are fully or partially secured by securities carried for the account of a customer.

 (5) A computation of the aggregate amount of customers' ledger debit balances.

 (6) A computation of the aggregate amount of customers' ledger credit balances.

 (7) A statement as to the approximate number of customer accounts.

 [(c) The term ''customer'' of a broker-dealer as used in this subsection includes every person except the broker-dealer.

 (d) The Commission may by order] (d) The Department may permit an applicant for registration as a broker-dealer under section 301 of the act which is not registered or has not applied for registration as a broker or dealer with the [SEC] Securities and Exchange Commission to file, execute and maintain a surety bond in compliance with § 303.051 (relating to surety bonds).

 (e) [Every] A broker-dealer registered under section 301 of the act that is registered as a broker or dealer with the [SEC] Securities and Exchange Commission shall maintain minimum net capital and comply with the aggregate indebtedness requirements as set forth in Rule 15c3-1 (17 CFR 240.15c3-1) [(relating to net capital requirements for brokers and dealers)] promulgated under the Securities Exchange Act of 1934.

§ 303.042. Investment adviser capital requirements.

 [(a) Every investment adviser registered under section 301 of the act (70 P.S. § 1-301) shall maintain at all times the following net worth requirements:

 (1) The following applies when an investment adviser has its principal place of business in a state other than this Commonwealth.

 (i) If the investment adviser currently is licensed as an investment adviser in the state in which it maintains its principal place of business and is in compliance with that state's net worth requirements, the net worth required by this section shall be the same as the net worth requirement imposed by that state.]

 (a) Net worth requirements.

 (1) An investment adviser registered under section 301 of the act (70 P.S. § 1-301) with its principal place of business in a state other than this Commonwealth shall meet the following net worth requirements:

 (i) The same as imposed by that state if the investment adviser is:

 (A) Currently licensed as an investment adviser in the state in which it maintains its principal place of business.

 (B) In compliance with that state's net worth requirements.

 (ii) If the investment adviser currently is not licensed as an investment adviser in the state in which it maintains its principal place of business, the net worth required [by] under this section [shall be] is the same as if the investment adviser had its principal place of business in this Commonwealth.

 (2) Except as provided in subsection [(e)] (d), an investment adviser registered as a broker-dealer under section 301 of the act that has its principal place of business in this Commonwealth [and also is registered as a broker-dealer under section 301 of the act] shall maintain [at all times] a minimum net capital [of $25,000] required under Rule 15c3-1 (17 CFR 240.15c3-1) (relating to net capital requirements for brokers or dealers).

 (3) An investment adviser registered under section 301 of the act that has its principal place of business in this Commonwealth and has custody of client funds or securities shall maintain [at all times] a minimum net worth of $35,000 unless the investment adviser [meets any] has custody solely as the result of one of the following:

 (i) [The investment adviser has custody solely as a result of receiving fees directly deducted from clients' funds or securities if] Holding the authority to make withdrawals from client accounts maintained by a qualified custodian to pay its advisory fee and the investment adviser:

 (A) Possesses written authorization from the client to deduct advisory fees from an account held by a qualified custodian.

 (B) Sends the qualified custodian written notice of the amount of the fee to be deducted from the client's account.

 (C) Sends the client a written invoice itemizing the fee, including any formulae used to calculate the fee, the time period covered by the fee and the amount of assets under management on which the fee was based.

 (D) Notifies the Department in writing on Form ADV that the investment adviser intends to use the safeguards provided in subsection clauses (A)—(C).

 (ii) [The investment adviser has custody solely as a result of serving] Serving as a general partner, manager of a limited liability company or a person occupying a similar status or performing a similar function which gives the investment adviser or its supervised person legal ownership or access to client funds or securities [if] and the following conditions are met:

 (A) The pooled investment vehicle is subject to audit at least annually and distributes its audited financial statements which have been prepared by an independent certified public accountant in accordance with generally accepted accounting principles to all limited partners, members or beneficial owners within 120 days of the end of its fiscal year.

 (B) The investment adviser:

 (I) Hires an independent party to review all fees, expenses and capital withdrawals from the accounts included in the pooled investment vehicle [prior to] before forwarding them to the qualified custodian with the independent party's approval for payment.

 (II) Sends written invoices or receipts to the independent party [which describe the amount of the fees (including any formulae used to calculate the fees, the time period covered by the fees and the amount of assets under management on which the fees were based),] describing:

 (-a-) The amount of the fees, including any formulae used to calculate the fees, the time period covered by the fees and the amount of assets under management on which the fees were based.

 (-b-) The expenses or capital withdrawals for the independent party to verify that payment of the fees, expenses or capital withdrawals is in accordance with the documents governing the operation of the pooled investment vehicle and any statutory requirements applicable thereto.

 [(iii) The investment adviser has custody solely as a result of acting as trustee for a beneficial trust in which the beneficial owners of the trust are a parent or step-parent; grandparent or step-grandparent; spouse, brother or step-brother, sister or step-sister; or grandchild or step-grandchild of the investment adviser.]

 (III) Notifies the Department in writing on Form ADV that the investment adviser intends to employ the use of the audit safeguards in subclauses (I) and (II).

 (4) An investment adviser that has its principal place of business in this Commonwealth and 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 $10,000[. An], unless the investment adviser [will not be deemed to be exercising discretion and subject to the requirements of this paragraph when it] places trade orders with a broker-dealer under a third-party trading agreement [if] and the following conditions are met:

 (i) The investment adviser [has executed] executes a separate investment adviser contract exclusively with its clients that acknowledges that a third-party agreement will be executed to allow the investment adviser to effect securities transactions for the client in the client's broker-dealer account.

 (ii) 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.

 (iii) [A third-party trading agreement is executed between the] The investment adviser, the client and the broker-dealer execute a third-party trading agreement 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.

 (5) An investment adviser that has its principal place of business in this Commonwealth and accepts prepayment of advisory fees of more than 6 months in advance and more than $1,200 per client shall maintain [at all times] a positive net worth.

 (b) Notice to the Department.

 (1) As a condition of the right to continue to transact business in this Commonwealth, an investment adviser registered under the act shall notify[,] the Department by the close of business on the next business day[, the Commission] if the investment adviser's total net worth is less than the minimum required net worth.

 (2) Within 24 hours after transmitting the notice, the investment adviser shall file a report of its financial condition including the following:

 [(1)] (i) A proof of money balances of ledger accounts in the form of a trial balance.

 [(2)] (ii) A computation of net worth.

 [(3)] (iii) An analysis of clients' securities and funds which are not segregated.

 [(4)] (iv) A computation of the aggregate amount of clients' ledger debit balances.

 [(5)] (v) A computation of the aggregate amount of clients' ledger credit balances.

 [(6)] (vi) A statement as to the number of client accounts.

 [(c) For the purpose of this section, the following terms have the following meanings:

 Custody—A person is deemed to have custody of client funds or securities if the person directly or indirectly holds clients funds or securities, has any authority to obtain possession of them or has the ability to appropriate them.

 Independent party—A person who meets all of the following requirements:

 (i) Is engaged by an investment adviser with respect to payment of fees, expenses or capital withdrawals from a pooled investment vehicle in which the investment adviser has custody solely as a result of serving as a general partner, manager of a limited liability company or a person occupying a similar status or performing a similar function which gives the investment adviser or its supervised person legal ownership or access to client funds or securities.

 (ii) Does not control, is not controlled by and is not under common control with the investment adviser.

 (iii) Within the preceding consecutive 12 month period, did not derive 5% or more of its gross revenues from the investment adviser who hired the person to be an independent party, including the amount to be received from the investment adviser under the terms of the independent party engagement.

 Net capital—The meaning set forth in 17 CFR 240.15c3-1 (relating to net capital requirements for brokers or dealers), promulgated under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—78kk).

 Net worth—The excess of assets over liabilities as determined by generally accepted accounting principles reduced by the following:

 (i) Prepaid expenses except items properly classified as current assets under generally accepted accounting principles.

 (ii) Deferred charges.

 (iii) Goodwill, franchises, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense and all other assets of an intangible nature.

 (iv) Home furnishings, automobiles and any other personal items not readily marketable in the case of an individual.

 (v) Advances or loans to stockholders and officers in the case of a corporation; members and managers in the case of a limited liability company; and advances or loans to partners in the case of a partnership.

 Pooled investment vehicle—

 (i) A limited partnership, limited liability company or an entity with a similar legal status and performing similar functions.

 (ii) The term does not include an investment company that has filed a registration statement under the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80a-64).

 Principal place of business—The meaning set forth in 17 CFR 275.203A-3(c) (relating to definitions) promulgated under the Investment Advisers Act of 1940 (15 U.S.C.A. §§ 80b-1—80b-21).

 Qualified custodian—The following shall be considered qualified custodians for purposes of this section:

 (i) A bank as that term is defined in section 102(d) of the act (70 P.S. § 1-102(d)).

 (ii) A Federally covered adviser as that term is defined in section 102(f.1) of the act.

 (iii) A broker dealer registered with the Commission under section 301 of the act (70 P.S. § 1-301).

 Supervised person—A person who meets the definition in section 202(a)(25) of the Investment Advisers Act of 1940 (15 U.S.C.A. § 80b-2(a)(25)).

 (d)] (c) Appraisals. For investment advisers registered or required to be registered under the act, the [Commission] Department may require that a current appraisal be submitted to establish the worth of an asset being calculated under the net worth formulation.

 [(e)] (d) Exception. The requirements of subsection (a)(2) do not apply to an investment adviser that has its principal place of business in this Commonwealth and [also] is registered as a broker-dealer under section 15 of the Securities Exchange Act of 1934 (15 U.S.C.A. § 77o) if the broker-dealer is one of the following:

 (1) Subject to, and in compliance with, [SEC] Rule 15c3-1.

 (2) A member of a National Securities Exchange whose members are exempt from [SEC] Rule 15c3-1 under subsection (b)(2) [thereof] and the broker-dealer is in compliance with all rules and practices of the exchange imposing requirements with respect to financial responsibility and the segregation of funds or securities carried for the account of customers.

§ 303.051. Surety bonds.

 (a) [The following applies with respect to the filing of a surety bond with the Commission by an investment adviser] A surety bond shall be:

 (1) [An investment adviser that has its principal place of business in this Commonwealth and does not meet the minimum net worth requirements of § 303.042 (relating to investment adviser capital requirements) may, by order of the Commission, have and maintain a surety bond in the amount of the net worth deficiency rounded up to the nearest $5,000. The surety bond shall be filed with the Commission] Filed with the Department on Uniform Surety Bond Form (Form U-SB) or successor form [thereto; shall be subject to the claims of all clients of the investment adviser regardless of the client's state of residence; and shall be issued].

 (2) Subject to the claims of all clients regardless of the client's state of residence.

 (3) Issued by a person licensed to issue surety bonds in this Commonwealth.

 [(2)] (b) An investment adviser that has its principal place of business in a state other than this Commonwealth shall comply with [paragraph (1)] subsection (a) unless the investment adviser [meets the following qualifications] is:

 [(i) Is registered] (1) Registered as an investment adviser in that state.

 [(ii) Is in] (2) In compliance with the applicable net worth and bonding requirements of the state in which it maintains its principal place of business.

 [(3) For purposes of this section, the term ''principal place of business'' has the same meaning as set forth in 17 CFR 275.203A-3(c) (relating to definitions) promulgated under the Investment Advisers Act of 1940 (15 U.S.C.A. §§ 80b-1—80b-21).]

 (c) An investment adviser that has its principal place of business in this Commonwealth and does not meet the minimum net worth requirements of § 303.042 (relating to investment adviser capital requirements) shall, if required by the Department, have and maintain a surety bond in the amount of the net worth deficiency rounded up to the nearest $5,000.

 [(b)] (d) A broker-dealer registered under the act but not registered as a broker or dealer under the Securities Exchange Act of 1934 [(15 U.S.C.A. §§ 78a—78kk) may, by order of the Commission] (15 U.S.C.A. §§ 78a—78pp) shall, as required by the Department, be permitted to have and maintain for the registration period a surety bond in the amount of the net capital deficiency rounded up to the nearest $5,000. [The surety bond shall:

 (1) Be filed with the Commission on Form U-SB or successor form thereto.

 (2) Be subject to the claims of all clients of the broker-dealer regardless of the client's state of residence.

 (3) Be issued by a person licensed to issue surety bonds in this Commonwealth.

 (c) Upon request of the Commission] (e) On request of the Department, a broker-dealer or investment adviser shall provide evidence of the existence of a surety bond.

[Continued on next Web Page]

---

No part of the information on this site may be reproduced for profit or sold for profit.

This material has been drawn directly from the official Pennsylvania Bulletin full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.

---