Mississippi Administrative Code › Title 1 - Secretary of State › Part 14 - Securities Regulation › Chapter 6 - INVESTMENT ADVISERS › Rule 1-14-6.19 - Record Keeping Requirements for Investment Advisers

Current through June 25, 2024
A. Every investment adviser registered or
				required to be registered under the Act shall make and keep true, accurate, and
				current the following books, ledgers, and records:
1. A journal or journals, including cash
				receipts and disbursement records, and any other records of original entry
				forming the basis of entries in any ledger.
2. General and auxiliary ledgers (or other
				comparable records) reflecting asset, liability, reserve, capital, income, and
				expense accounts.
3. 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
				memoranda shall show the terms and conditions of the order, instruction,
				modification, or cancellation; shall identify the person connected with the
				investment adviser who recommended the transaction to the client and the person
				who placed the order; and shall show the account for which entered, the date of
				entry, and the bank or broker-dealer by or through whom executed, where
				appropriate. Orders entered pursuant to the exercise of discretionary power
				shall be so designated.
4. All
				checkbook, bank statements, canceled checks, and cash reconciliations of the
				investment adviser.
5. All bills or
				statements (or copies of), paid or unpaid, relating to the investment adviser's
				business as an investment adviser.
6. All trial balances, financial statements,
				and internal audit working papers relating to the investment adviser's
				business.
7. 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; or
c. The placing or execution of any order to
				purchase or sell any security, provided, however,
i. That 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
ii. That 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, except that 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.
8.
				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.
9. A copy of all powers of attorney and other
				evidence of the granting of any discretionary authority by any client to the
				investment adviser.
10. 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.
11. 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 (2) 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, a memorandum of the investment adviser indicating the reasons
				for the recommendation shall also be included.
12. A record of every transaction in a
				security in which the investment adviser or any advisory representative (as
				hereinafter defined) of the investment adviser has, or by reason of any
				transaction acquires, any direct or indirect beneficial ownership.
a. 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 whom 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 (10) days after the end of the calendar quarter in
				which the transaction was effected.
b. The investment adviser or advisory
				representative shall not be required to keep records of:
i. 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
ii. Transactions in securities
				which are direct obligations of the United States.
c. For purposes of Subsection (A)(12) of this
				Rule, the following definitions will apply:
i.
				The term
Advisory Representative
shall mean any partner, officer,
				or director of the investment adviser; any employee who participates in any way
				in the determination of which recommendations shall be made; any employee who,
				in connection with his duties, obtains any information concerning which
				securities are being recommended prior to the effective dissemination of the
				recommendations; and 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:
(A) Any person in a control relationship to
				the investment adviser,
(B) Any
				affiliated person of a controlling person, and
(C) Any affiliated person of an affiliated
				person.
ii.
Control
shall mean the power to exercise a controlling influence
				over the management or policies of a company, unless such power is solely the
				result of an official position with such company. Any person who owns
				beneficially, either directly or through one or more controlled companies, more
				than twenty-five percent (25%) of the voting securities of a company shall be
				presumed to control such company.
d. An investment adviser shall not be deemed
				to have violated the provisions of Subsection (A)(12) of this Rule because of
				the failure to record securities transactions of any advisory representative if
				the investment adviser establishes that it instituted adequate procedures and
				used reasonable diligence to promptly obtain reports of all transactions
				required to be recorded.
13. Notwithstanding the provisions of
				Subsection (A)(12) above, where the investment adviser is primarily engaged in
				a business or businesses other than advising investment advisory clients, a
				record of every transaction in a security in which the investment adviser or
				any advisory representative (as hereinafter defined) of the investment adviser
				has, or by reason of any transaction acquires, any direct or indirect
				beneficial ownership.
a. 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 whom 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 (10) days after the end of
				the calendar quarter in which the transaction was effected.
b. The investment adviser or any advisory
				representative shall not be required to keep records of:
i. 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
ii. Transactions in securities
				which are direct obligations of the United States.
c. An investment adviser is "primarily
				engaged in a business or businesses other than advising investment advisory
				clients" when, for each of its most recent three (3) fiscal years or for the
				period of time since organization, whichever is lesser, the investment adviser
				derived, on an unconsolidated basis, more than fifty percent (50%) of:
i. Its total sales and revenue, and
ii. Its income (or loss) before income taxes
				and extraordinary items from such other business or businesses.
d. For the purposes of Subsection
				(A)(13) of this Rule, the following definitions will apply:
i. The term
Advisory
				Representative
, when used in connection with a company primarily engaged
				in a business or businesses other than advising investment advisory clients,
				shall mean any partner, officer, director, or employee of the investment
				adviser who participates in any way in the determination of which
				recommendation shall be made, or whose functions or duties relate to the
				determination of which securities are being recommended prior to the effective
				dissemination of the recommendations. The term shall also apply to any of the
				follow persons who obtain information concerning securities recommendations
				being made by the investment adviser prior to the effective dissemination of
				such recommendations or of the information concerning the recommendations:
(A) Any person in a control relationship to
				the investment adviser;
(B) Any
				affiliated person of a controlling person; and
(C) Any affiliated person of an affiliated
				person.
ii.
Control
shall mean the power to exercise a controlling influence
				over the management policies of a company unless such power is solely the
				result of an official position with such company. Any person who owns
				beneficially, either directly or through one or more controlled companies, more
				than twenty-five percent (25%) of the voting securities of a company shall be
				presumed to control such company.
e. An investment adviser shall not be deemed
				to have violated the provisions of Subsection (A)(13) of this Rule because of
				the failure to record securities transactions of any advisory representative if
				the investment adviser establishes that it instituted adequate procedures and
				used reasonable diligence to promptly obtain reports of all transactions
				required to be recorded.
14. A copy of each written statement,
				amendment, or revision given or sent to any client or prospective client of the
				investment adviser in accordance with the provisions of Rules
				6.23 and
				6.29 and a record of the dates that
				each written statement, amendment, or revision was given, or offered to be
				given, to any client or prospective client who subsequently becomes a
				client.
15. For each client that
				was obtained by the adviser by means of a solicitor to whom a cash fee was paid
				by the adviser:
a. Evidence of a written
				agreement to which the adviser is a party related to the payment of such
				fee;
b. 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
c.
				A copy of the solicitor's written disclosure statement. The written agreement,
				acknowledgment, and solicitor disclosure statement will be considered in
				compliance if such documents are in compliance with Rule
				6.31.
For the purposes of this Rule, the term
Solicitor
is defined in Rule
				  6.31(A).
16. 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);
				provided, however, that, 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 Subsection.
17. A file containing a copy of all written
				communications received or sent (1) regarding any litigation involving the
				investment adviser or any investment adviser representative or employee and (2)
				regarding any written customer or client complaint.
18. Written information about each investment
				advisory client that is the basis for making any recommendation or providing
				any investment advice to such client.
19. Written procedures that supervise the
				activities of employees and investment adviser representatives and that are
				reasonably designed to achieve compliance with applicable securities laws and
				regulations.
20. 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 registrant or its investment adviser
				representatives. The file should contain, but is not limited to, all
				applications, amendments, renewal filings, and correspondence.
21. Copies, with original signatures of the
				investment adviser's appropriate signatory and the investment adviser
				representative, of each initial Form U4; Each amendment to Disclosure Reporting
				Pages (DRPs U4) must be retained by the investment adviser (filing on behalf of
				the investment adviser representative) and must be made available for
				inspection upon regulatory request.
22. When the adviser has inadvertently held
				or obtained a client's securities or funds and returned them to the client
				within three (3) business days of receiving them or has forwarded checks drawn
				by clients and made payable to third parties within three (3) business days of
				receipt, the adviser will be considered as not having custody but shall keep
				the following records:
a. For receipt of
				client securities or funds, a ledger or other listing of all securities or
				funds received and returned, including the following information:
i. Issuer;
ii. Type of security and series;
iii. Date of issue;
iv. For debt instruments, the denomination,
				interest rate, and maturity date;
v. Certificate number, including alphabetical
				prefix or suffix;
vi. Name in which
				registered;
vii. Date received by
				the adviser;
viii. Date returned to
				client or sender;
ix. Form of
				delivery to client or sender, or copy of the form of delivery to client or
				sender; and
x. Mail confirmation
				number, if applicable, or confirmation by client or sender of the fund's or
				security's return.
b. For
				checks made payable to a third party, a ledger or other listing of all checks
				received and forwarded, including the following information:
i. Payor;
ii. Type of check (personal, corporate,
				etc.);
iii. Date of
				check;
iv. Amount of
				check;
v. Check number;
vi. Payee;
vii. Date received by the adviser;
viii. Date forwarded to the third
				party;
ix. Form of delivery to
				third party, or copy of the form delivery to third party; and
x. Mail confirmation number, if applicable,
				or confirmation by the third party of the check's receipt.
xi. A copy of the check will suffice for
				items (b)(i)-(vi) above.
23. If an investment adviser obtains
				possession of securities that are acquired from the issuer in a transaction or
				chain of transactions not involving any public offering that comply with the
				exception from custody under Rule
				6.35(B)(2), the
				adviser shall keep the following records:
a. A
				record showing the issuer or current transfer agent's name, address, phone
				number, and other applicable contract information pertaining to the party
				responsible for recording client interests in the securities; and
b. A copy of any legend, shareholder
				agreement, or other agreement showing that those securities that are
				transferable only with prior consent of the issuer or holders of the
				outstanding securities of the issuer.