69W-600.0161. Net Capital and Financial Reporting Requirements for Investment Advisers


Effective on Wednesday, May 6, 2015
  • 1(1) Net capital requirements for investment advisers. 8The net capital of an investment adviser applicant or registrant under Section 20517.12, F.S., 22shall be maintained at a level required by this rule.

    32(a) An investment adviser registered or required to be registered with the Office of Financial Regulation (Office) who has custody of client funds or securities shall maintain minimum net capital of $25,000 except:

    661. An investment adviser having custody solely due to direct fee deduction shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.

    942. An investment adviser having custody solely due to advising pooled investment vehicles and complying with the terms described under paragraph 11569W-600.0132(3)(d), 116F.A.C., shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.

    1333. An investment adviser having custody solely because the investment adviser, associated person of the investment adviser, or employee, director, or owner of the investment adviser is the trustee for a trust, and where the investment adviser acts as the investment adviser to that trust and complies with the terms described under paragraph 18669W-600.0132(3)(e), 187F.A.C., shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.

    2044. An investment adviser having custody solely because the investment adviser, associated person of the investment adviser, or employee, director or owner of the investment adviser is the trustee for a beneficial trust and complies with the terms described under paragraph 24569W-600.0132(3)(f), 246F.A.C., shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.

    263(b) An investment adviser registered or required to be registered with the Office who does not have custody of client funds or securities, or who is described in subparagraphs (1)(a)1. through 4. above, shall maintain minimum net capital of $2,500.

    304(c) For purposes of this rule, the term “net capital,” shall mean assets minus liabilities, as determined by United States generally accepted accounting principles. The Office may require a current appraisal be submitted in order to establish the worth of any asset.

    347(2) Financial reporting requirements for investment advisers.

    354(a) Every registered investment adviser who requires payment of advisory fees six months or more in advance and in excess of $500 per client, or who has custody of client funds or securities except those who have custody solely due to direct fee deduction or who meet the requirements of paragraphs 40569W-600.0132(3)(d), 406(3)(e) or (3)(f), F.A.C., shall annually file with the Office audited financial statements as of the end of the investment adviser’s fiscal year within 90 days following the end of the fiscal year. Audited financial statements filed pursuant to this rule must be:

    4491. Examined in accordance with generally accepted auditing standards and prepared in conformity with United States generally accepted accounting principles;

    4692. Audited by a certified public accountant that meets the standards of independence described in Rule 2-01(b) and (c) of Regulation S-X (49217 C.F.R. §210.2-01(b) 495and (c)), which is incorporated by reference in Rule 50469W-200.002, 505F.A.C.; and,

    5073. Accompanied by an opinion of the accountant with respect to the financial statements, and by a note stating the principles used to prepare it, the basis of included securities, and any other explanations required for clarity.

    544(b) Every registered investment adviser who does not have custody of client funds or securities, or those who have custody solely due to direct fee deduction or who meet the requirements of paragraphs 57769W-600.0132(3)(d), 578(3)(e), or (3)(f), F.A.C., shall annually file with the Office unaudited financial statements as of the end of the investment adviser’s fiscal year within 90 days following the end of the fiscal year. Unaudited financial statements filed pursuant to this rule must be prepared in accordance with United States generally accepted accounting principles and must include:

    6341. A Statement of Financial Condition or Balance Sheet;

    6432. A Statement of Income; and,

    6493. An oath or affirmation that such statement or report is true and correct to the best knowledge, information, and belief of the person making such oath or affirmation. Such oath or affirmation shall be made before a person authorized to administer such oath or affirmation, and shall be made by a duly authorized representative of the entity for whom the financial statements were prepared.

    7144. The Office may also specifically request an investment adviser pursuant to Section 727517.201, F.S., 729to include a Statement of Changes in Financial Position, Statement of Changes in Stockholder’s/Partner’s/Proprietor’s Equity, and a Statement of Changes in Liabilities Subordinated to Claims of General Creditors.

    757(c) This rule shall not apply to an investment adviser also registered as a dealer with the Office 775if the dealer registrant is a current member of a securities association registered pursuant to section 15A of the Securities Exchange Act of 1934 (80015 U.S.C. § 78o-3804), which is incorporated by reference in Rule 81269W-200.002, 813F.A.C., and such association requires financial reports to be filed with it.

    825(d) Registration as an investment adviser may be denied, revoked, or suspended pursuant to Section 840517.161(1), F.S., 842if financial statements reflect:

    8461. Net capital less than required under this rule; or

    8562. An audit opinion qualified as to the scope of the audit, the entity’s ability to continue on a going-concern basis, or other material qualifications; or

    8823. An adverse audit opinion or a disclaimer of opinion.

    892(3) For purposes of this rule, “custody” is defined in paragraph 90369W-600.0132(1)(a), 904F.A.C.

    905Rulemaking Authority 907517.03(1), 908517.12(9), 909517.121(2) FS. 911Law Implemented 913517.12(9), 914517.121(2), 915517.161(1), 916517.201 FS. 918History–New 5-6-15.

     

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