California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2 - Corporate Securities › Article 11 - General Provisions Relating to Agents, Broker-Dealers and Investment Advisers › Section 260.241.2 - Reports by Broker-Dealers and Investment Advisers

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) General Rule. Subject to the provisions
				  of subsection (c) of this section, every licensed broker-dealer, and every
				  licensed investment adviser subject to the provisions of Section
				  260.237.2 of these rules, shall
				  file an annual financial report, as follows:
(1) The annual report for a broker-dealer
				  shall contain a Statement of Financial Condition, a Statement of Income, a
				  Statement of Changes in Stockholders' or Partners' or Sole Proprietor's Equity
				  and a Statement of Changes in Liabilities Subordinated to Claims of General
				  Creditors. Supporting schedules shall include a Schedule of Securities, a
				  Computation of Net Capital under Rule 15c3-1 under the Securities Exchange Act
				  of 1934 (17 CFR
				  240.15c3-1), a Computation
				  for Determination of the Reserve Requirement under Rule 15c3-3(a)
				  (17 CFR
				  240.15c3-3(a)),
				  Information Relating to the Possession or Control Requirements under Rule
				  15c3-3 (17 CFR
				  240.15c3-3), and shall be
				  filed with the annual report.
(2)
				  The annual report for an investment adviser shall contain a balance sheet,
				  income statement, and computations of the minimum financial requirements
				  required under Section
				  260.237.2 of these
				  rules.
(3) The financial statements
				  included in the annual report shall be prepared in accordance with generally
				  accepted accounting principles and shall be audited by either an independent
				  certified public accountant or independent public accountant; provided,
				  however, the financial statements need not be audited if:
The broker-dealer or investment adviser has not held or
					 accepted custody of funds and securities for or owed money or securities to
					 customers or clients during the period covered by the report; and
(A) if the licensee is a broker-dealer, the
				  securities business has been limited to soliciting subscriptions for securities
				  of an issuer and the broker-dealer promptly forwarded the subscriptions to the
				  issuer, underwriter, sponsor or other distributor of the securities and
				  received checks, drafts, notes or other evidence of indebtedness payable solely
				  to the issuer, underwriter, sponsor or distributor who delivered the securities
				  purchased directly to the subscriber; and
(B) if the licensee is an investment adviser,
				  the investment adviser only has discretionary authority over client funds or
				  securities, the investment adviser has taken only limited powers of attorney to
				  execute transactions on behalf of its clients, or the investment adviser does
				  not accept prepayment of more than $500 per client for more than six months in
				  advance; or
(C) as otherwise
				  permitted by the Commissioner.
(4) The report shall be filed not more than
				  90 days after the investment adviser or broker-dealer's fiscal year
				  end.
(5) Whenever the Commissioner
				  so requires, a financial report shall be filed as of the date, and within the
				  period, and in the form specified in the Commissioner's request. The
				  Commissioner may require the financial report to be
				  audited.