Code of Maine Rules › 02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION › 032 - OFFICE OF SECURITIES › Chapter 515 - INVESTMENT ADVISER LICENSING › Section 032-515-7 - Record keeping requirements for investment advisers

Current through 2024-29, July 17, 2024
1.
Record Keeping Requirements for All
				Investment Advisers.
Every investment adviser licensed or required to be
				licensed under 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 entries in any
				ledger.
B. General and auxiliary
				ledgers, or other comparable records, reflecting asset, liability, reserve,
				capital, income and expense accounts.
C. A record of the investment adviser's
				securities transactions.
(1) The investment
				adviser shall prepare a memorandum setting forth:
(a) each order given by the investment
				adviser for the purchase or sale of any security;
(b) any instruction received by the
				investment adviser from the client concerning the purchase, sale, receipt or
				delivery of a particular security; and,
(c) any modification or cancellation of any
				such order or instruction.
(2) The memorandum shall:
(a) show the terms and conditions of the
				order, instruction, modification or cancellation;
(b) identify the person:
(i) connected with the investment adviser who
				recommended the transaction to the client, and
(ii) who placed the order;
(c) show:
(i) the account for which entered;
(ii) the date of entry; and
(iii) the bank or broker-dealer by or through
				which executed where appropriate; and
(d) designate orders entered pursuant to the
				exercise of discretionary power.
D. All check books, bank statements, canceled
				checks and cash reconciliations of the investment adviser.
E. All bills or statements, or copies of
				bills or statements, paid or unpaid, relating to the investment adviser's
				business as an investment adviser.
F. All trial balances, financial statements
				prepared in accordance with generally accepted accounting principles, and
				internal audit working papers relating to the investment adviser's business as
				an investment adviser. For purposes of this paragraph, "financial statements"
				shall mean 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 Section
				12 of this chapter.
G. Records of the investment adviser's
				written communications
(1) The investment
				adviser shall keep originals of all written communications received and copies
				of all written communications sent by the investment adviser relating to:
(a) any recommendation made or proposed to be
				made and any advice given or proposed to be given;
(b) any receipt, disbursement, or delivery of
				funds or securities; and
(c) the
				placing or execution of any order to purchase or sell any security.
(2) The investment adviser shall
				not be required to keep any unsolicited market letters and other similar
				communications or general public distribution not prepared by or for the
				investment adviser.
(3) If the
				investment adviser sends any notice, circular, or other advertisement offering
				any report, analysis, publication, or other investment advisory service to more
				than ten (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. However,
				if the notice, circular, or advertisement is distributed to persons named on
				any list, the investment adviser shall 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 which identifies 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. A copy of all powers of attorney and other
				evidence of the granting of any discretionary authority by any client to the
				investment adviser.
J. A copy in
				writing 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 a copy of each notice,
				circular, advertisement, newspaper article, investment letter, bulletin, or
				other communication including by electronic media, that the investment adviser
				circulates or distributes, directly or indirectly, to two or more persons,
				other than persons connected with the investment adviser. If the notice,
				circular, advertisement, newspaper article, investment letter, bulletin, or
				other communication, including by electronic media, recommends the purchase or
				sale of a specific security and does not state the reasons for the
				recommendation, the investment adviser shall retain a memorandum of the
				investment adviser indicating the reasons for the recommendation.
L. Records of transactions in securities in
				which the investment adviser or an affiliated person has a beneficial ownership
				interest.
(1) The investment adviser shall
				keep a record of every transaction in a security in which:
(a) the investment adviser; and
(b) any person described in Subparagraphs (2)
				or (3), whichever is applicable; has, or by reason of any transaction acquires,
				any direct or indirect beneficial ownership.
(2) For all investment advisers except those
				that are primarily engaged in a business or businesses other than advising
				investment advisory clients, records of transactions shall include records of
				the transactions of:
(a) any partner,
				officer, or director of the investment adviser;
(b) any employee who participates in any way
				in the determination of which recommendations are made;
(c) any employee who, in connection with his
				or her duties, obtains any information concerning which securities are being
				recommended prior to the effective dissemination of the recommendations;
				and
(d) any of the following
				persons who obtain information concerning securities recommendations being made
				by the investment adviser prior to the effective dissemination of the
				recommendations:
(i) any person in a control
				relationship to the investment adviser;
(ii) any affiliated person of a controlling
				person; and
(iii) any affiliated
				person of any affiliated person.
(3) For investment advisers that are
				primarily engaged in a business or businesses other than advising investment
				advisory clients, records of transactions shall include records of the
				transactions of:
(a) any partner, officer,
				director, employee of the investment adviser:
(i) who participates in any way in the
				determination of which recommendations are made, or
(ii) who, in connection with his or her
				functions or duties, obtains any information concerning which securities are
				being recommended prior to the effective dissemination of the recommendations;
				and
(b) any of the
				following persons, who obtain information concerning securities recommendations
				being made by the investment adviser prior to the effective dissemination of
				the recommendations or of the information concerning the recommendations:
(i) any person in a control relationship to
				the investment adviser;
(ii) any
				affiliated person of a controlling person; and
(iii) any affiliated person of an affiliated
				person.
(4)
				For the purposes of this paragraph, the following definitions apply:
(a) "Affiliated person" with respect to
				another person means:
(i) any person directly
				or indirectly controlling, controlled by, or under common control with the
				other person;
(ii) any officer,
				director, or partner of the other person; or
(iii) any spouse or relative, by blood or
				marriage, of the other person.
(b) "Control" means the power to direct or
				influence the management or policies of a company through the ownership of
				voting securities, by contract, or otherwise. Any person who owns beneficially,
				either directly or through one or more controlled companies, more than
				twenty-five (25) percent of the voting securities of a company shall be
				presumed to control such company.
(c) "Primarily engaged in a business or
				businesses other than advising investment advisory clients" means an investment
				adviser that, for each of its most recent three (3) fiscal years or for the
				period of time since organization, whichever is lesser, derived, on an
				unconsolidated basis, more than fifty (50) percent of its:
(i) total sales and revenues; and
(ii) income or loss before income taxes and
				extraordinary items; from such other business or businesses.
(5) The investment
				adviser shall record each transaction no later than ten (10) days after the end
				of the calendar quarter in which the transaction was effected.
(6) The investment adviser is not required to
				keep records of transactions:
(a) effected in
				any account over which neither the investment adviser nor any person described
				in Subparagraphs (2) or (3) has any direct or indirect influence or control;
				and
(b) in securities which are
				direct obligations of the United States.
(7) The record shall state:
(a) the title and amount of the security
				involved;
(b) the date and nature
				of the transaction, such as purchase, sale or other disposition; and
(c) the name of the broker-dealer or bank
				with or through which the transaction was effected.
(8) An investment adviser shall not be deemed
				to have violated the provisions of this paragraph because of the failure to
				record securities transactions of any person described in Subparagraphs (2) and
				(3) if the investment adviser establishes that it instituted adequate
				procedures and used reasonable diligence to obtain promptly reports of all
				transactions required to be recorded.
M. 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 the provisions of Section
				8 of this chapter, and a record of the
				dates that each written statement, and each amendment or revision, was given,
				or offered to be given, to any client or prospective client who subsequently
				becomes a client.
N. 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 in any notice, circular, advertisement, newspaper article,
				investment letter, bulletin, or other communication including but not limited
				to electronic media that the investment adviser circulates or distributes,
				directly or indirectly, to two (2) or more persons, other than persons
				connected with the investment adviser. However, with respect to the performance
				of managed accounts, the retention of all account statements, if they reflect
				all debits, credits, and other transactions in a client's account for the
				period of the statement, and all worksheets necessary to demonstrate the
				calculation of the performance or rate of return of all managed accounts shall
				be deemed to satisfy the requirements of this paragraph.
O. A file containing a copy of all written
				communications received or sent regarding any litigation involving the
				investment adviser or any investment adviser representative, or employee, and
				regarding any written customer or client complaint.
P. Written information about each investment
				advisory client that is the basis for making any recommendation or providing
				any investment advice to such client.
Q. Written procedures to supervise the
				activities of employees and investment adviser representatives that are
				reasonably designed to achieve compliance with applicable securities laws and
				regulations.
R. 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 and that pertains to the licensee or its investment adviser
				representatives. The file shall contain, but is not limited to, all
				applications, amendments, renewal filings, and correspondence.
S. A record of the investment adviser's
				privacy policies, all privacy notices sent to consumers or customers and the
				date such notices were sent.