§ 303.012. Investment adviser registration procedure.
(a) An applicant for initial registration as an investment adviser shall complete a Uniform Application for Investment Adviser Registration (Form ADV), or a successor form.
(b) The applicant shall complete and file with the Department or with IARD:
(1) Form ADV.
(2) The filing fee required under section 602(d.1) of the act (70 P.S. § 1-602(d.1)).
(3) The compliance assessment in section 602.1(a)(4) of the act (70 P.S. § 1-602.1(a)(4)).
(4) Any exhibits required under this section.
(c) Except as set forth in subsection (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 all of the following:
(1) An audited balance sheet of the applicant prepared in accordance with generally accepted accounting principles which is as of the end of the applicant’s most recent fiscal year.
(2) An audit report containing an unqualified opinion of an independent certified public accountant within which the accountant shall submit, as a supplementary opinion, comments based on the audit as to the:
(i) Material inadequacies found to exist in the accounting system.
(ii) Internal accounting controls.
(iii) Procedures for safeguarding securities and funds with an indication of corrective action taken or proposed.
(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 all of the following:
(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) Must 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.
(h) As part of the requirements relating to the statements of financial condition set forth in 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) 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.
(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 Department an amendment on Form ADV within 30 days of the occurrence of the event which requires the filing of the amendment.
(j) An applicant that maintains its principal place of business in a state other than this Commonwealth 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.
Authority The provisions of this § 303.012 amended under sections 303(a)—(e), 304(b) and 609(a) of the Pennsylvania Securities Act of 1972 (70 P.S. § § 1-303(a)—(e), 1-304(b) and 1-609(a)); section 202.C of the Department of Banking and Securities Code (71 P.S. § 733-202.C); and section 9(b) of the Takeover Disclosure Law (70 P.S. § 79(b)).
Source The provisions of this § 303.012 adopted March 29, 1974, effective March 30, 1974, 4 Pa.B. 582; amended December 27, 1985, effective December 28, 1985, 15 Pa.B. 4585; amended January 17, 1992, effective January 18, 1992, 22 Pa.B. 278; amended January 28, 1994, effective January 29, 1994, 24 Pa.B. 653; amended September 8, 1995, effective September 9, 1995, 25 Pa. B. 3722; amended September 1, 2000, effective September 2, 2000, 30 Pa.B. 4551; amended April 15, 2005, effective April 16, 2005, 35 Pa.B. 2307; transferred and renumbered from 64 Pa. Code § 303.012, December 14, 2012, effective December 15, 2012, 42 Pa.B. 7533; amended January 12, 2018, effective January 13, 2018, 48 Pa.B. 389. Immediately preceding text appears at serial pages (364737) to (364739).
Cross References This section cited in 10 Pa. Code § 304.022 (relating to investment adviser required financial reports); and 10 Pa. Code § 603.031 (relating to public inspection of records).
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 Code 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.
