§ 830-X-3-.16. Record-Keeping Requirements For Investment Advisers
(1) Every investment adviser registered or required to be registered under the Act shall make and keep current the following books, ledgers and records:
(a) A journal or journals, including cash receipts and disbursements records, and any other records of original entry forming the basis of entries in any ledger.
(b) General and auxiliary ledgers (or other comparable records) reflecting assets, liabilities, reserves, capital, income and expense accounts.
(c) A memorandum of each order given by the investment adviser for the purchase or sale of any security, of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt or delivery of a particular security, and of any modification or cancellation of any such order or instruction. Such memoranda shall show the terms and conditions of the order, instruction, modification or cancellation; shall identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed such order; and shall show the account for which entered, the date of entry, and the bank, or dealer by or through whom executed where appropriate. Orders entered pursuant to the exercise of discretionary power shall also be designated.
(d) All checkbooks, bank statements, cancelled checks and cash reconciliations of the investment adviser.
(e) All bills or statements (or copies thereof), paid or unpaid, relating to the business of the investment adviser as such.
(f) All trial balances, financial statements, and internal audit working papers relating to the business of such investment adviser.
(g) Originals of all written communications received and copies of all written communications sent by such investment adviser relating to:
1. Any recommendation made or proposed to be made and any advice given or proposed to be given,
2. Any receipt, disbursement or delivery of funds or securities, and
3. The placing or execution of any order to purchase or sell any security; provided, however:
(i) That the investment adviser shall not be required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser, and
(ii) That if the investment adviser sends any notice, circular or other advertisement offering any report, analysis, publication or other investment advisory service to more than 10 persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent; except that if such notice, circular or advertisement is distributed to persons named on any list, the investment adviser shall retain with a copy of such notice, circular or advertisement a memorandum describing the list and the source thereof.
(h) A list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of any client.
(i) All powers of attorney and other evidences of the granting of any discretionary authority by any client to the investment adviser, or copies thereof.
(j) All written agreements (or copies thereof) entered into by the investment adviser with any client or otherwise relating to the business of such investment adviser.
(k) A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin or other communication recommending the purchase or sale of a specific security, which the investment adviser circulates or distributes, directly or indirectly, to 10 or more persons (other than investment advisory clients or persons connected with such investment adviser), and if such notice, circular, advertisement, newspaper article, investment letter, bulletin or other communication does not state the reasons for such recommendation, a memorandum of the investment adviser indicating the reasons therefor.
(1) All of their advertisements and all records, worksheets, and calculations necessary to form the basis for performance data in their advertisements.
(m) A record of every transaction in a security in which the investment adviser or any investment adviser representative of such investment adviser has, or by reason of such transaction acquires, any direct or indirect beneficial ownership as determined by 17 C.F.R. § 240.13d-3. Such record shall state the title and amount of the security involved; the date and nature of the transaction (i.e., purchase, sale, or other acquisition or disposition); the price at which it was effected; and the name of the dealer or bank with or through whom the transaction was effected. Such record may also contain a statement declaring that the reporting or recording of any such transaction shall not be construed as an admission that the investment adviser or investment adviser representative has any direct or indirect beneficial ownership in the security. A transaction shall be recorded not later than 10 days after the end of the calendar quarter in which the transaction was effected. The exemptions are as follows:
1. Transactions effected in any account over which neither the investment adviser nor any investment adviser representative of the investment adviser has any direct or indirect influence or control; and
2. Transactions in securities which are direct obligations of the United States.
(n) An investment adviser shall not be deemed to have violated the provisions of paragraph (m) because of its failure to record securities transactions of any investment adviser representative if it establishes that it instituted adequate procedures and used reasonable diligence to obtain promptly reports of all transactions required to be recorded.
(o) A copy of each written statement and each amendment or revision thereof, given or sent to any client or prospective client of such investment adviser in accordance with the provision of Rule 830-X-3-.17 and a record of the date that each written statement, and each amendment or revision thereof, was given, or offered to be given, to any client or prospective client who subsequently becomes a client.
(2) If an investment adviser subject to (1) of this rule has custody or possession of securities or funds of any client, the records required to be made and kept under (1) above shall include:
(a) A journal or other record showing all purchases, sales, receipts and deliveries of securities (including certificate or other identifying numbers) for such accounts and all other debits and credits to such accounts.
(b) A separate ledger account for each client showing all purchases, sales, receipts and deliveries of securities, the date and price of each such purchase and sale, and all debits and credits.
(c) Copies of confirmations of all transactions effected for or from the account of any such client.
(d) A record for each security in which any such client has a position, which record shall show the name of each such client having any interest in each security, the amount of, or interest of, such client in such security, and the location of each such security.
(3) Every investment adviser subject to (1) of this rule who renders any investment advisory or management service to any client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, make and keep true, accurate and current:
(a) Records showing separately for each such client the securities purchased and sold, and the date, amount and price of each such purchase and sale.
(b) For each security in which any such client has a current position, information from which the investment adviser can promptly furnish the name of each such client, and the current amount of or interest of such client in such security.
(4) Any books or records required by this rule may be maintained by the investment adviser in such manner that the identity of any client to whom such investment adviser renders investment advisory services is indicated by numerical or alphabetical code or some similar designation.
(5) All books and records required to be made under the provisions of (1) and (3)(a) of this rule shall be preserved for a period of not less than three (3) years, the first two (2) years of which shall be kept in an easily accessible place.
(6) Partnership articles and any amendments thereto, articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor, shall be maintained in the principal office of the investment adviser and preserved until at least three years after termination of the enterprise.
(7) An investment adviser subject to (1) of this rule, before ceasing to conduct or discontinuing business as an investment adviser shall arrange for and be responsible for the preservation of the books and records required to be maintained and preserved under this rule for the remainder of the period specified in this rule, and shall notify the Commission in writing of the exact address where such books and records will be maintained during such period.
(8) All books, records or other documents required to be maintained and preserved under this rule may be stored on microfilm, microfiche, or an electronic data processing system or similar system utilizing an internal memory device provided a printed copy of any such record is immediately accessible.
(9) Any book or record made, kept, maintained, and preserved in compliance with SEC Rules 17a-3 [17 C.F.R. §§ 240.17a-3] and 17a-4 [17 C.F.R. § 240.17a-4] under the Securities Exchange Act of 1934, which is substantially the same as the book, or other record required to be made, kept, maintained, and preserved under this rule shall be deemed to be made, kept, maintained, and preserved in compliance with this rule.
Author:(Filed September 28, 1990.)
Statutory Authority: Code of Ala. 1975, § 8-6-23.
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