California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2.3 - Capital Access Companies › Article 11 - Books and Records › Section 280.650 - Records to be Maintained by Capital Access Companies

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Every licensed capital access company
				  shall maintain and keep true, current, and accurate the accounts, books, and
				  other documents relating to its business which constitute the record forming
				  the basis for financial statements required to be filed pursuant to Section
				  28501 of
				  the Corporations Code.
(b) Every
				  licensed capital access company shall maintain and keep current the following
				  books, accounts, and other documents:
(1)
				  Journals (or other records of original entry) containing an itemized daily
				  record in detail of all purchases and sales of securities (including sales and
				  redemption of its own securities), all receipts and deliveries of securities
				  (including certificate numbers if such detail is not recorded by custodian or
				  transfer agent), all receipts and disbursements of cash and all other debits
				  and credits. Such records shall show for each such transaction the name and
				  quantity of securities, the unit and aggregate purchase or sale price,
				  commission paid, the market on which effected, the trade date, the settlement
				  date, and the name of the person through or from whom purchased or received or
				  to whom sold or delivered. and, in a subsidiary portfolio investment record,
				  provide the complete legal name and accounting and other information (including
				  sufficient information to calculate coupons, accruals, maturities, puts, and
				  calls) necessary to identify, value, and account for each investment.
(2) General and auxiliary ledgers (or other
				  records) reflecting all assets, liability, reserve, capital, income and expense
				  accounts, including:
(i) Separate ledger
				  accounts (or other records) reflecting the following:
(a) Securities in transfer (stated in terms
				  of securities quantities only);
(b)
				  Securities in physical possession; (stated in terms of securities quantities
				  only)
(c) Securities borrowed and
				  securities loaned (stated in dollar amounts and securities quantities as
				  appropriate);
(d) Monies borrowed
				  and monies loaned together with a record of the collateral therefor and
				  substitutions in such collateral (stated in dollar amounts and securities
				  quantities as appropriate);
(e)
				  Dividends and interest received (stated in dollar amounts only);
(f) Dividend receivable and interest accrued
				  (stated in dollar amounts only).
(ii) Separate ledger accounts (or other
				  records) for each portfolio security, showing (as of trade dates):
(a) the quantity and unit and aggregate price
				  for each purchase, sale, receipt, and delivery of securities and commodities
				  for such accounts, and
(b) all
				  other debits and credits for such accounts. Securities positions and money
				  balances in such ledger accounts (or other records) shall be brought forward
				  periodically but not less frequently than at the end of fiscal quarters. Any
				  portfolio security, the salability of which is conditioned, shall be so noted.
				  A memorandum record shall be available setting forth, with respect to each
				  portfolio security account, the amount and declaration ex-dividend, and payment
				  dates of each dividend declared thereon.
(iii) Separate ledger accounts (or other
				  records) for each person with or through which transactions in portfolio
				  securities are effected, showing each purchase or sale of securities with or
				  through such persons, including details as to the date of the purchase or sale,
				  the quantity and unit and aggregate price of such securities, and the
				  commissions or other compensation paid to such persons. Purchases or sales
				  effected during the same day at the same price may be aggregated.
(iv) Separate ledger accounts (or other
				  records), which may be maintained by a transfer agent or registrar, showing for
				  each shareholder of record of the capital access company the number of shares
				  of capital stock of the company held. In respect of share accumulation accounts
				  (arising from periodic investment plans, dividend reinvestment plans, deposit
				  of issued shares by the owner thereof, etc.), details shall be available as to
				  the dates and number of shares of each accumulation, and except with respect to
				  already issued shares deposited by the owner thereof, prices of each such
				  accumulation.
(3)
				  Corporate charters, certificates of incorporation or trust agreements, and
				  by-laws, and minute books of stockholders' and directors' or trustees'
				  meetings; and minute books of directors' or trustees' committee and advisory
				  board or advisory committee meetings.
(4) A record of each brokerage order given by
				  or in behalf of the capital access company for, or in connection with, the
				  purchase or sale of securities, whether executed or unexecuted. Such record
				  shall include the name of the broker, the terms and conditions of the order and
				  of any modification or cancellation thereof, the time of entry or cancellation,
				  the price at which executed, and the time of receipt of report of execution.
				  The record shall indicate the name of the person who placed the order in behalf
				  of the capital access company.
(5)
				  A record of all other portfolio purchases or sales showing details comparable
				  to those prescribed in paragraph (4) of subsection (b) of this
				  section.
(6) A record of the proof
				  of money balances in all ledger accounts (except shareholder accounts), in the
				  form of trial balances. Such trial balances shall be prepared currently at
				  least once a month.
(7) A record
				  for each fiscal quarter, which shall be completed within ten days after the end
				  of such quarter, showing specifically the basis or bases upon which the
				  allocation of orders for the purchase and sale of portfolio securities to named
				  brokers or dealers and the division of brokerage commissions or other
				  compensation on such purchase and sale orders among named persons were made
				  during such quarter. The record shall indicate the consideration given to (i)
				  sales of shares of the capital access company by brokers or dealers, (ii) the
				  supplying of services or benefits by brokers or dealers to the capital access
				  company, its investment adviser or any persons affiliated therewith, and (iii)
				  any other considerations other than the technical qualifications of the brokers
				  and dealers as such. The record shall show the nature of the services or
				  benefits made available, and shall describe in detail the application of any
				  general or specific formula or other determinant used in arriving at such
				  allocation of purchase and sale orders and such division of brokerage
				  commissions or other compensation. The record shall also include the identities
				  of the persons responsible for the determination of such allocation and such
				  division of brokerage commissions or other compensation.
(8) A record in the form of an appropriate
				  memorandum identifying the person or persons, committees, or groups authorizing
				  the purchase or sale of portfolio securities. Where an authorization is made by
				  a committee or group, a record shall be kept of the names of its members who
				  participated in the authorization. There shall be retained as part of the
				  record required by this paragraph any memorandum, recommendation, or
				  instruction supporting or authorizing the purchase or sale of portfolio
				  securities. The requirements of this paragraph are applicable to the extent
				  they are not met by compliance with the requirements of paragraph (b)(4) of
				  this section.
(9) Files of all
				  advisory material received from the investment adviser, any advisory board or
				  advisory committee, or any other persons from whom the capital access company
				  accepts investment advice, other than material which is furnished solely
				  through uniform publications distributed generally.
(10) Files of all investor suitability
				  statements. Such files shall include the individual's name, telephone number,
				  and the basis for establishing the suitability of the investor as an
				  "accredited investor."
(11) A
				  record of all complaints received from investors. There shall be retained as
				  part of the record required by this paragraph a description of the nature of
				  the complaint and the final disposition and resolution of the
				  complaint.
(12) Files containing
				  due diligence documentation of the small business firms that the capital access
				  company invests in, including but not limited to the following:
(a) copies of each issuer's prospectus, if
				  one was prepared;
(b) copies of
				  each issuer's offering circular, if one was prepared;
(c) copies of each issuer's most recent
				  annual report;
(d) copies of each
				  issuer's most recent balance sheet and profit and loss and retained earnings
				  statements; and
(e) copies of
				  written records of any other material information that comes to the knowledge
				  or possession of the capital access company before the investment is
				  made.
(13) The term
				  "other records" as used in the expressions "journals (or other records of
				  original entry)" and "ledger accounts (or other records)" shall be construed to
				  include, where appropriate, copies of voucher checks, confirmations, or similar
				  documents which reflect the information required by the applicable rule or
				  rules in appropriate sequence and in permanent form, including similar records
				  developed by the use of automatic data processing systems.