(a) A state
investment adviser registered or required to be registered under AS 45.55 shall
make the following books and records and keep them true, accurate, and current:
(1) journals, including cash receipts and
disbursements 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
state investment adviser for the purchase or sale of a security, of any
instruction received by the state investment adviser from the client concerning
the purchase, sale, receipt, or delivery of a particular security, and of any
modification or cancellation of an order or instruction; the memorandum must
(A) show the terms and conditions of the
order, instruction, modification, or cancellation;
(B) identify the person connected with the
investment adviser who recommended the transaction to the client and the person
who placed the order;
(C) show the
account for which the order was entered, the date of entry, and the bank,
broker, or dealer by or through whom the order was executed, if applicable;
and
(D) designate that the order
was entered under the exercise of discretionary power, if discretionary power
was exercised;
(4) all
check books, bank statements, cancelled checks, and cash reconciliations of the
state investment adviser;
(5) all
bills or statements, or copies of them, paid or unpaid, relating to the state
investment adviser's business as an investment adviser;
(6) all trial balances, financial statements,
and internal audit working papers relating to the state investment adviser's
business as an investment adviser;
(7) the original of each written
communication received and a copy of each written communication sent by the
state investment adviser,
(A) and relating to
(i) a recommendation made or proposed to be
made or advice given or proposed to be given;
(ii) the receipt, disbursement, or delivery
of funds or securities; or
(iii)
the placing or execution of any order to purchase or sell any security;
and
(B) except that
(i) the state investment adviser is not
required to keep unsolicited market letters or other similar communications of
general public distribution not prepared by or for the state investment
adviser; and
(ii) if the state
investment adviser sends a notice, circular, or other advertisement offering a
report, analysis, publication, or other advisory service to more than 10
persons, the state investment adviser is not required to keep a record of the
names and addresses of the persons to whom the notice, circular, or
advertisement was sent; however, if the notice, circular, or advertisement is
distributed to persons named on a list, the state investment adviser shall
retain with the copy of the notice, circular, or advertisement a memorandum
describing the list and all its source;
(8) a list or other record of each client
account, identifying those accounts in which the state investment adviser is
vested with discretionary power with respect to the funds, securities, or
transactions of a client;
(9) a
copy of a power of attorney and other evidence of the granting of any
discretionary authority by a client to the state investment adviser;
(10) a copy in writing of each agreement
entered into by the state investment adviser with a client, and any other
written agreements otherwise relating to the business of the state investment
adviser as an investment adviser;
(11) a copy of each notice, circular,
advertisement, newspaper article, investment letter, bulletin, or other
communication, including a communication by electronic media, that the state
investment adviser circulates or distributes, directly or indirectly, to two or
more persons, other than persons connected with the state investment adviser;
if a communication listed in this paragraph recommends the purchase or sale of
a specific security and does not state the reasons for the recommendation, the
state investment adviser shall include a memorandum indicating the reasons for
the recommendation;
(12) a record
of each transaction in a security in which the state investment advisor or any
advisory representative has, or by reason of any transaction acquires, direct
or indirect beneficial ownership; the record must state the title and amount of
the security involved, the date of the transaction, whether the transaction was
a purchase, sale, or other acquisition or disposition, the price at which the
transaction 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 may not
be construed as an admission that the state investment adviser or advisory
representative has a direct or indirect beneficial ownership in the security; a
transaction must be recorded not later than 10 days after the end of the
calendar quarter in which the transaction was effected; however, a state
investment adviser
(A) need not make or keep
a record of a transaction
(i) effected in any
account over which the state investment advisor or an advisory representative
lacks direct or indirect influence or control; or
(ii) in securities that are direct
obligations of the United States; and
(B) does not violate this paragraph because
of the failure to record a securities transaction of an advisory representative
if the state investment adviser establishes that adequate procedures were
instituted and reasonable diligence was used to obtain reports of each
transaction required to be recorded;
(13) a copy of each written disclosure
statement and each amendment or revision to that statement given or sent to a
client or prospective client of the state investment adviser in accordance with
the provisions of 17 C.F.R.
275.204-3 and a record of the dates that each
written disclosure statement, and each amendment or revision, was given, or
offered to be given, to any client or prospective client who subsequently
becomes a client;
(14) for each
client that the state investment adviser obtained by means of a solicitor to
whom a cash fee was paid by the state investment adviser
(A) evidence of a written agreement to which
the state investment adviser is a party related to the payment of the fee; a
written agreement that satisfies the requirements of 17 C.F.R. 275.206(4)-3 (a)
also satisfies the requirements of this subparagraph;
(B) a signed and dated acknowledgment of
receipt from the client evidencing the client's receipt of the
(i) state investment adviser's written
disclosure statement given or sent in accordance with
17 C.F.R.
275.204-3; and
(ii) solicitor's written disclosure statement
given or sent in accordance with 17 C.F.R. 275.206(4)-3; and
(C) a copy of the solicitor's
written disclosure statement given or sent in accordance with 17 C.F.R.
275.206(4)-3 ;
(15) all
accounts, books, internal working papers, and 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 a communication
by electronic media, that the state investment adviser circulates or
distributes, directly or indirectly, to two or more persons, other than persons
connected with the state investment adviser; however, with respect to the
performance of a managed account, the retention of the following items
satisfies the requirements of this paragraph:
(A) each account statement, if it reflects
all debits, credits, and other transactions in a client's account for the
period of the statement; and
(B)
each worksheet necessary to demonstrate the calculation of the performance or
rate of return of the managed accounts;
(16) a copy of all communications received or
sent regarding any litigation related to a written customer or client complaint
involving the state investment adviser, an investment adviser representative,
or an employee of the state investment adviser or investment adviser
representative;
(17) written
information about each advisory client that is the basis for making a
recommendation or providing investment advice to that client;
(18) written procedures for the supervision
of the activities of employees and investment adviser representatives that are
reasonably designed to achieve compliance with applicable securities laws and
regulations;
(19) a copy of each
document, other than a notice of general dissemination, that was filed with or
received from a state or federal agency or self-regulatory organization and
that pertains to the state investment adviser or to an advisory representative
within the meaning set out in (
l)(1)(A) of this section;
documents to be kept under this paragraph include applications, amendments,
renewal filings, and correspondence.
(b) If a state investment adviser has custody
of client funds or securities, the state investment adviser shall, in addition
to the books and records required under (a) of this section, make the following
books and records and keep them true, accurate, and current:
(1) a journal or other record showing all
purchases, sales, receipts, and deliveries of securities for all accounts and
all other debits and credits to the accounts;
(2) a separate ledger account for each client
showing all purchases, sales, receipts, and deliveries of securities, the date
and price of each purchase and sale, and all debits and credits;
(3) copies of confirmations of all
transactions effected by or for the account of each client; and
(4) a record for each security in which a
client has a position showing the name of each client having an interest in the
security, the amount invested or interest of each client in the security, and
the location of the security.
(c) A state investment adviser who renders an
investment supervisory or management service to a client shall, with respect to
the portfolio being supervised or managed and to the extent that the
information is reasonably available to or obtainable by the state investment
adviser, make and keep true, accurate, and current
(1) records showing separately for each
client the securities purchased and sold, and the date, amount, and price of
each purchase and sale; and
(2) for
each security in which a client has a current position, information from which
the state investment adviser can promptly furnish the name of the client, and
the current amount or interest of the client.
(d) A state investment adviser may maintain
books or records required by this section so that the identity of a client to
whom the state investment adviser renders investment supervisory services is
indicated by a numerical or alphabetical code or a similar
designation.
(e) A state investment
adviser shall preserve the following records in the following manner:
(1) records required by (a)(1) - (10),
(a)(12) - (14), (b), and (c)(1) of this section shall be maintained and
preserved in an easily accessible place for not less than five years after the
end of the fiscal year during which the last entry was made on the record; for
the first two years, those records shall be kept in the state investment
adviser's principal place of business;
(2) partnership articles and any amendments
to them, articles of incorporation, charters, minute books, and stock
certificate books of the state investment adviser and of any predecessor shall
be maintained in state investment adviser's principal place of business and
shall be preserved until at least three years after termination of the
enterprise;
(3) each record
required by (a)(11) and (a)(15) of this section shall be maintained and
preserved in an easily accessible place for not less than five years after the
end of the fiscal year during which the state investment adviser last published
or otherwise disseminated that record, directly or indirectly; for the first
two years, that record shall be kept in the state investment adviser's
principal place of business; and
(4) each record required by (a)(16) - (19) of
this section shall be maintained and preserved in an easily accessible place
for not less than five years after the end of the fiscal year during which the
last entry was made on the record; for the first two years, that record shall
be kept in the state investment adviser's principal place of business; however,
that record need be kept only for the period during which the state investment
adviser was registered or required to be registered in this state, if that
period is less than the five-year period required by this paragraph.
(f) If a state investment adviser
provides a client advisory services at a place of business other than the state
investment adviser's principal place of business, the state investment adviser
shall maintain, for the applicable period set out in (e) of this section, the
following records or copies of those records at the place of business of the
state investment adviser from which the client receives advisory services:
(1) records required by (a)(3), (a)(7) -
(10), (a)(13) - (14), (a)(16) - (18), (b), and (c) of this section;
(2) records required by (a)(11) and (a)(15)
of this section, if those records identify the name of the investment adviser
representative providing investment advice from that business location, or
which identify the business location's physical address, mailing address,
electronic mailing address, or telephone number.
(g) A state investment adviser, before
ceasing to conduct or discontinuing business as an investment adviser, shall
arrange for and be responsible for the preservation of the books and records
required to be maintained and preserved under this section for the remainder of
the applicable period specified in (e) of this section, and shall notify the
administrator in writing of the exact address where those books and records
will be maintained during the remainder of that period.
(h) Records required to be maintained and
preserved under this section may be maintained and preserved by photographic
process on magnetic disk, tape, or other computer storage medium, and may be
maintained and preserved in that form for the applicable period required by (e)
or (f) of this section. If records are produced or reproduced by a photographic
film or computer storage medium, the state investment adviser shall
(1) arrange the records and index the films
or computer storage medium so as to permit the immediate location of any
particular record;
(2) be ready at
all times to provide promptly any facsimile enlargement of film, computer
printout, or copy of the computer storage medium that the administrator or the
administrator's representative requests;
(3) store, separately from the original, at
least one copy of the film or computer storage medium for the applicable period
required by (e) or (f) of this section;
(4) with respect to records stored on a
computer storage medium, maintain procedures for maintenance and preservation
of, and access to, records so as to reasonably safeguard records from loss,
alteration, or destruction;
(5)
with respect to records stored on photographic film, and for purposes of
examining those records, at all times have available facilities for immediate,
easily readable projection of the film and for producing easily readable
facsimile enlargements; and
(6)
with respect to records which, in the ordinary course of the state investment
adviser's business, are created by the state investment adviser on electronic
media or are received by the state investment adviser solely on electronic
media or by electronic data transmission, be able to electronically display and
immediately produce printed copies of those records.
(i) If a state investment adviser is engaged
in more than one enterprise or activity the state investment adviser shall
maintain separate books of accounts and records for the investment advisory
business and the other businesses. The books and records must clearly identify
the division among these businesses of income, expenses, and assets.
(j) A book or other record made, kept,
maintained, and preserved in compliance with
17 C.F.R.
240.17a-3 and
17 C.F.R.
240.17a-4 that is substantially the same as a
book or other record required to be made, kept, maintained, and preserved under
this section, satisfies the applicable record-keeping requirement of this
section.
(k) A state investment
adviser registered or required to be registered in this state and that has its
principal place of business in a state other than this state is exempt from the
requirements of this section, if the state investment adviser
(1) is registered or licensed as an
investment adviser in the state in which it maintains its principal place of
business; and
(2) is in compliance
with the applicable books and records requirements of the state in which it
maintains its principal place of business.
(l) In this section,
(1) "advisory representative," if the state
investment adviser is primarily engaged in a business
(A) providing services to advisory clients,
means
(i) a partner, officer, or director of
the state investment adviser;
(ii)
an employee of the state investment adviser who makes a recommendation or takes
part in determining which recommendation is to be made, or whose functions or
duties relate to the determination of which securities are to be recommended
before the effective dissemination of the recommendations; and
(iii) a person who obtains information
concerning securities recommendations by the state investment adviser before
the effective dissemination of the recommendations, if the person who obtains
the information is in a control relationship to the state investment adviser,
is an affiliated person of that controlling person, or is an affiliated person
of that affiliated person;
(B) other than providing services to advisory
clients, means
(i) a partner, officer,
director, or employee of the state investment adviser who makes a
recommendation or takes part in determining which recommendation is to be made,
or whose functions or duties relate to the determination of which securities
are to be recommended before the effective dissemination of the
recommendations; and
(ii) a person
who obtains information concerning securities recommendations by the state
investment adviser before the effective dissemination of the recommendations,
if the person who obtains the information is in a control relationship to the
state investment adviser, is an affiliated person of that controlling person,
or is an affiliated person of that affiliated person;
(2) "control" means the power to
exercise a controlling influence over the management or policies of a company,
unless that power is solely the result of an official position with that
company; a person who owns beneficially, either directly or through one or more
controlled companies, more than 25 percent of the voting securities of a
company is presumed to control that company;
(3) "discretionary power" does not include
discretion as to the price at which or the time when a transaction is or is to
be effected, if, before the order is given by the state investment adviser, the
client has directed or approved the purchase or sale of a definite amount of
the particular security;
(4)
"financial statements" means a balance sheet prepared in accordance with
generally accepted accounting principles, an income statement, and a cash flow
statement;
(5) "investment
supervisory services" means the giving of continuous advice as to the
investment of funds on the basis of the individual needs of each
client;
(6) "solicitor" means a
person who, for compensation, acts as an agent of an investment adviser in
referring potential clients.
(m) For purposes of (
l)(1)(B) of this section, a state investment adviser is
primarily engaged in a business other than providing services to advisory
clients if, for each of its most recent three fiscal years or for the period of
time since organization, whichever period is shorter, the state investment
adviser derived from that other business, on an unconsolidated basis, more than
50 percent of the state investment adviser's
(1) total sales and revenues; and
(2) income or loss before income taxes and
extraordinary items.
