Iowa Administrative Code › Agency 191 - Insurance Division › Securities › Chapter 50 - Regulation of Securities Offerings and Those Who Engage in the Securities Business › Rule 191-50.42 - Record-keeping Requirements for Investment Advisers

Current through Register Vol. 47, No. 3, July 24, 2024
(1) An investment adviser registered or
				required to be registered pursuant to the Act shall make and keep true,
				accurate and 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 any ledger entries.
b. General and auxiliary ledgers (or other
				comparable records) reflecting asset, liability, reserve, 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. The
				memorandum shall describe the terms and conditions of the order, instruction,
				modification or cancellation; identify the person connected with the investment
				adviser who recommended the transaction to the client and the person who placed
				the order; indicate whether discretionary power was exercised; and indicate the
				account for which entered, the date of entry, and, where applicable, the bank
				or broker-dealer by or through whom executed.
d. All checkbooks, bank statements, canceled
				checks and cash reconciliations of the investment adviser.
e. All invoices, bills, or statements, or
				copies of those documents, relating to the investment adviser's business as an
				investment adviser regardless of whether the expense or debt is paid or
				unpaid.
f. All trial balances,
				financial statements, and internal audit working papers relating to the
				investment adviser's business as an investment adviser. For the purposes of
				this paragraph, "financial statements" means a balance sheet prepared in
				accordance with generally accepted accounting principles, an income statement,
				a cash flow statement, and a net worth computation, if applicable, as required
				by subrule 50.40(7).
g. Originals
				of all written communications received by and copies of all written
				communications sent by the 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; or
(3) The
				placing or execution of any order to purchase or sell any security, except:
1. 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
2. The
				investment adviser is not required to keep a record of the names and addresses
				of persons to whom a notice, circular, or other advertisement offering any
				report, analysis, publication or other investment advisory service is sent if
				sent to more than ten persons; however, if the notice, circular, or other
				advertisement is distributed to persons named on any list, the investment
				adviser must retain with the copy of the notice, circular, or advertisement a
				memorandum describing the list and its source.
h. A list or other record of all accounts
				identifying the accounts in which the investment adviser is vested with any
				discretionary power with respect to the funds, securities or transactions of
				any client.
i. Copies of all powers
				of attorney and other documents granting discretionary authority by any client
				to the investment adviser.
j.
				Copies of each agreement entered into by the investment adviser with any
				client, and all other written agreements otherwise relating to the investment
				adviser's business as an investment adviser.
k. A file containing copies of each notice,
				circular, advertisement, newspaper article, investment letter, bulletin, or
				other communication including electronic media that the investment adviser
				circulates or distributes, directly or indirectly, to two or more persons not
				affiliated with the investment adviser and, if the notice, circular,
				advertisement, newspaper article, investment letter, bulletin, or other
				communication including one in electronic media format recommends the purchase
				or sale of a specific security and does not state the reasons for the
				recommendation, a memorandum indicating the investment adviser's reasons for
				the recommendation.
l. Transactions
				involving beneficial ownership.
(1) A record
				of every transaction in a security in which the investment adviser or any
				advisory representative of the investment adviser has or by reason of any
				transaction acquires a direct or indirect beneficial ownership, except the
				following:
1. Transactions effected in any
				account over which neither the investment adviser nor any advisory
				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.
(2) The required record shall
				state, at a minimum, 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 the transaction was effected, and the name of
				the bank or broker-dealer with or through which the transaction was effected.
				The record may also contain a statement declaring that the reporting or
				recording of any transaction shall not be construed as an admission that the
				investment adviser or advisory representative has any direct or indirect
				beneficial ownership in the security. A transaction must be recorded no later
				than ten days after the end of the calendar quarter in which the transaction
				was effected. An investment adviser shall not be in violation of this paragraph
				because of a failure to record securities transactions of an advisory
				representative if the investment adviser establishes that the investment
				adviser instituted adequate procedures and used reasonable diligence to
				promptly obtain reports of all transactions required by this paragraph to be
				recorded.
m.
				Notwithstanding the provisions of paragraph 50.42(1)
"l,"
when
				the investment adviser is primarily engaged in a business or businesses other
				than advising investment advisory clients, a record must be maintained of every
				transaction in a security in which the investment adviser or any advisory
				representative of the investment adviser has, or by reason of any transaction
				acquires, any direct or indirect beneficial ownership, except:
(1) Transactions effected in any account over
				which neither the investment adviser nor any advisory representative of the
				investment adviser has any direct or indirect influence or control;
				or
(2) Transactions in securities
				which are direct obligations of the United States.
The 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 broker-dealer or bank with or through which the transaction was
				  effected. The record may also contain a statement declaring that the reporting
				  or recording of any transaction shall not be construed as an admission that the
				  investment adviser or advisory representative has any direct or indirect
				  beneficial ownership in the security. A transaction shall be recorded not later
				  than ten days after the end of the calendar quarter in which the transaction
				  was effected. An investment adviser shall not be deemed to have violated the
				  provisions of this subparagraph because of a failure to record securities
				  transactions of an advisory representative if the investment adviser
				  establishes that the investment adviser instituted adequate procedures and used
				  reasonable diligence to promptly obtain reports of all transactions required to
				  be recorded.
n. A
				copy of each written statement and each amendment or revision, given or sent to
				any client or prospective client of the investment adviser in accordance with
				rule 191-5036. (502), and a record of
				the dates on which each written statement, amendment and revision was given or
				offered to be given to any client or any prospective client who subsequently
				becomes a client.
o. For each
				client that was obtained by the investment adviser by means of a solicitor to
				whom a cash fee was paid by the investment adviser:
(1) A copy of any written agreement relating
				to the payment of a cash fee to which the investment adviser is a
				party;
(2) A signed and dated
				acknowledgment of receipt from the client evidencing the client's receipt of
				the investment adviser's disclosure statement and a written disclosure
				statement of the solicitor; and
(3)
				A copy of the solicitor's written disclosure statement.
The written agreement, acknowledgment and solicitor
				  disclosure statement will be deemed to be in compliance if such documents
				  comply with Rule 275.206(4)-3 of the Investment Advisers Act of
				  1940.
p. All
				accounts, books, internal working papers, and any other records or documents
				that are necessary to form the basis for or demonstrate the calculation of the
				performance or rate of return of all managed accounts or securities
				recommendations provided in any notice, circular, advertisement, newspaper
				article, investment letter, bulletin, or other communication, including
				electronic media, that is directly or indirectly circulated or distributed by
				the investment adviser to two or more persons (other than persons connected
				with the investment adviser). However, with respect to the performance of
				managed accounts only, the retention of all account statements reflecting all
				debits, credits, and other transactions in a client's account for the period of
				the statement, and the retention of all worksheets necessary to demonstrate the
				calculation of the performance or rate of return of the managed account shall
				satisfy the requirements of this paragraph.
q. A file containing copies of all written
				communications received or sent regarding any litigation or customer or client
				complaints involving the investment adviser or any investment adviser
				representative or employee.
r. The
				basis, in writing, for any recommendation or investment advice provided to an
				investment advisory client.
s.
				Copies of all written procedures regarding the supervision of the employees and
				investment adviser representatives that are reasonably designed to achieve
				compliance with securities laws and regulations.
t. A file containing a copy of each document
				(other than any notices of general dissemination) that was filed with or
				received from any state or federal agency or self-regulatory organization
				pertaining to the investment adviser or its investment adviser representatives,
				as defined by subrule 50.42(11), including but not limited to all applications,
				amendments, renewal filings, and correspondence.
u. Original copies signed by the lawful
				signatory of the investment adviser and the investment adviser representative
				of each initial Form U-4 and each U-4 Amendment to Disclosure Reporting Pages
				(DRPs).
v. For each transaction in
				which the investment adviser inadvertently held or obtained the client's
				securities or funds and returned them to the client within three business days
				of receipt or forwarded a check drawn by a client and made payable to a third
				party within three business days of receipt, a ledger or list of all funds or
				securities held or obtained with the following information:
(1) Issuer;
(2) Type of security and series;
(3) Date of issue;
(4) For debt instruments, the denomination,
				interest rate and maturity date;
(5) Certificate number, including
				alphabetical prefix or suffix;
(6)
				Name in which registered;
(7) Date
				submitted to the investment adviser;
(8) Date sent to client or sender;
(9) Form of delivery to client or sender, or
				copy of the form of delivery to client or sender; and
(10) Mail confirmation number, if applicable,
				or confirmation by client or sender of the return of the security or
				fund.
w. If an investment
				adviser obtains possession of securities that are acquired from the issuer in a
				transaction or chain of transactions not involving a public offering that
				comply with the exception from custody in paragraph
				50.39(2)
"b,"
the adviser shall keep:
(1) A record showing the issuer's or current
				transfer agent's name, address, telephone number, and other applicable contact
				information pertaining to the party responsible for recording the client's
				interests in the securities; and
(2) A copy of any legend, shareholder
				agreement, or other agreement providing that the securities are transferable
				only with prior consent of the issuer or holders of the outstanding securities
				of the issuer.
x. A copy
				of a written business continuity and succession plan as required by rule
				191-5047.
				(502).