Current through Register Vol. 56, No. 18, September 16, 2024
(a) For purposes of
this section, as referenced in Rule 204-2 (
17 CFR
275.204-2) :
1. "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/capital
computation, if applicable, as required by
13:47A-2.2.
2. "Other communication" shall include
communications by electronic media and social media.
(b) For purposes of this section, the Bureau
requires investment advisers to retain the books and records described in Rule
204-2(a)(11), (16), and 204-2(e)(3) ( 17 CFR 275.204- 2(a)(11), (16), and
275.204-2(e)(3)
) under the Investment Advisers Act of 1940,
15
U.S.C. §§
80b-1 et seq., that are
distributed to two or more persons.
(c) Subject to the limitations of Section 222
of the Investment Advisers Act of 1940 ( 15 U.S.C. § 80b-
18a
), all investment advisers shall keep at their principal place of business,
open to inspection for the Bureau of Securities of the State of New Jersey, all
books and records, as set forth in Rule 204-2 (
17 CFR
275.204-2) under the Investment Advisers Act
of 1940, 15 U.S.C. §§ 80 b et seq.
(d) Subject to the limitations of Section 222
of the Investment Advisers Act of 1940 ( 15 U.S.C. § 80b-
18a
), all investment advisers shall keep at their principal place of business,
open to inspection for the Bureau:
1. A
litigation file documenting any criminal or civil action or administrative
proceeding filed in any state or Federal court or by any administrative agency
against the investment adviser or any of its personnel with respect to a
securities or an investment advisory transaction and the disposition of the
action or proceeding;
2. Written
information about each investment advisory client that is the basis for making
any recommendation or providing any investment advice to such client;
3. Written policies and procedures to
supervise the activities of employees and investment adviser representatives
that are reasonably designed to achieve compliance with applicable securities
laws, rules, and regulations;
4. 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 that pertains to the registrant or its
investment adviser representatives as that term is defined in Rule
204-2(a)(12)(iii)(A) ( 17 CFR 275.204- 2(a)(12)(iii)(A)) under the Investment
Advisers Act of 1940,
15
U.S.C. §§
80b-1 et seq., which file
should contain, but is not limited to, all applications, amendments, renewal
filings, and correspondence;
5.
Copies, with original signatures of the investment adviser's appropriate
signatory and the investment adviser representative, of each initial Form U4
and each amendment to Disclosure Reporting Pages (DRPs U4);
6. Copies of the written disclosure delivered
pursuant to
13:47A-2.13. If the disclosure
obligation is met in whole or in part by the delivery of a prospectus, the
investment adviser need only note such delivery and need not retain a copy of
the prospectus in each client's file;
7. Where the investment adviser inadvertently
held or obtained a client's securities or funds and returned them to the client
within three business days of receiving them or has forwarded checks drawn by
clients and made payable to third parties within three business days of
receipt, the investment adviser shall keep a ledger or other listing of all
securities or funds held or obtained, 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 given to the
investment adviser;
viii. Date sent
to client or sender;
ix. Form of
delivery to client or sender or copy of the form of delivery to client or
sender;
x. Mail confirmation
number, if applicable, or confirmation by client or sender of the fund's or
security's return; and
xi. Date
each check was received by the investment adviser;
8. 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 206(4)-2(b)(2) ( 17 CFR 275.204- 2(b)(2))
under the Investment Advisers Act of 1940 (
15
U.S.C. §§
80b-1 et seq.), the
investment adviser shall keep the following records:
i. A record showing the issuer or current
transfer agent's name, address, phone number, and other applicable contact
information pertaining to the party responsible for recording client interests
in the securities; and
ii. A copy
of any legend, shareholder agreement, or other agreement showing that those
securities are transferable only with prior consent of the issuer or holders of
the outstanding securities of the issuer; and
9. Sales or advertising material intended for
the use in soliciting prospective investors or for training persons who will be
making such communications.
(e) Subject to the limitations of Section 222
of the Investment Advisers Act of 1940 ( 15 U.S.C. § 80b-
18a
), if an investment adviser has custody or possession of securities or funds of
any clients, as defined in
13:47A-7.2, the investment adviser
must make and keep the following additional records:
1. A copy of any and all documents executed
by the client (including a limited power of attorney) under which the
investment adviser is authorized or permitted to withdraw a client's funds or
securities maintained with a custodian upon the investment adviser's
instruction to the custodian;
2. A
copy of each of the client's quarterly account statements, as generated and
delivered by the qualified custodian. If the investment adviser also generates
a statement that is delivered to the client, the investment adviser shall also
maintain copies of such statements along with the date such statements were
sent to the clients;
3. If
applicable to the investment adviser's situation, a copy of the special
examination report verifying the completion of the examination by an
independent certified public accountant and describing the nature and extent of
the examination;
4. A record of any
finding by the independent certified public accountant of any material
discrepancies found during the examination;
5. If applicable, evidence of the client's
designation of an independent representative;
6. All records and evidence of compliance
required by Rule 206(4)-2 ( 17 CFR 275.206(4)-2) under the Investment Advisers
Act of 1940; and
7. If an
investment adviser has custody of funds or securities because it advises a
pooled investment vehicle, as defined in Rule 206(4)-2(d)(2)(iii) ( 17 CFR
275.206(4)-2), the investment adviser shall also keep the following records:
i. True, accurate, and current account
statements;
ii. Where the
investment adviser complies with Rule 206(4)-2 ( 17 CFR 275.206(4)-2), the
records required to be made and kept shall include the date(s) of the audit, a
copy of the audited financial statements, and evidence of the mailing of the
audited financial to all limited partners, members, or other beneficial owners
within 120 days of the end of its fiscal year; and
iii. Where the investment adviser complies
with 13:47A-6.3(a)56
ii(2), the records required to be made and kept shall include a copy of the
written agreement with the independent party reviewing all fees and expenses,
indicating the responsibilities of the independent third party, and copies of
all invoices and receipts showing approval by the independent party for payment
through the qualified custodian.
(f) In addition to the requirements of Rule
204-2(e) (
17 CFR
275.204-2(e)) , every
investment adviser subject to (c) above shall preserve the following records in
the manner prescribed:
1. Books and records
required to be made under (d) above shall be maintained and preserved in an
easily accessible place for a period of not less than five years from the end
of the fiscal year during which the last entry was made on such record, the
first two years in the principal office of the investment adviser, or for the
time period during which the investment adviser was registered or required to
be registered in the State, if less.
2. Notwithstanding other record preservation
requirements of Rule 204-2(e), the following records or copies shall be
required to be maintained for the period described in Rule 204-2(e) at the
business location of the investment adviser from which the customer or client
is being provided or has been provided with investment advisory services:
i. Records required to be preserved under
paragraphs (a)(3), (a)(7) through (10), (a)(14) and (15), (a)(17) through (19),
(b) and (c) inclusive of SEC Rule 204-2 of the Investment Advisers Act of 1940
( 17 CFR 275.204- 2 (1996)); and
ii. The records or copies required under the
provision of Rule 204-2(a)(11) and (a)(16), which records or related 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)
An investment adviser subject to (c) and (d) above, before ceasing to conduct
or discontinuing business as a registered 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 period
specified in this section, and shall notify the Bureau in writing, within 30
days of a termination of its business or a change to the address where the
books and records will be maintained, of the exact address where the books and
records will be maintained during the period.
(h) Investment advisers required to maintain
and preserve records pursuant to this section, shall comply with the storage
requirements of this subsection.
1. Pursuant
to this section, the records required to be maintained and preserved may be
immediately produced or reproduced, and maintained and preserved for the
required time, by an investment adviser on:
i.
Paper or hard copy form, as those records are kept in their original
form;
ii. Micrographic media,
including microfilm, microfiche, or any similar medium; or
iii. Electronic storage media, including any
digital storage medium or system that meets the terms of this
subsection.
2. The
investment adviser must:
i. Arrange and index
the records in a way that permits easy location, access, and retrieval of any
particular record;
ii. Provide
promptly any of the following that the Bureau (by its examiners or other
representatives) may request:
(1) A legible,
true, and complete copy of the record in the medium and format in which it is
stored;
(2) A legible, true, and
complete printout of the record; and
(3) Means to access, view, and print the
records; and
iii.
Separately store, for the time period required for preservation of the original
record, a duplicate copy of the record on any medium allowed by this
subsection.
3. In the
case of records created or maintained on electronic storage media, the
investment adviser must establish and maintain policies and procedures:
i. To maintain and preserve the records, so
as to reasonably safeguard them from loss, alteration, or
destruction;
ii. To limit access to
the records to properly authorized personnel and the Bureau (including its
examiners and other representatives); and
iii. To reasonably ensure that any
reproduction of a non-electronic original record on electronic storage media is
complete, true, and legible when retrieved.
(i) To the extent that the U.S. Securities
and Exchange Commission promulgates changes to Rule 204-2 of the Investment
Advisers Act of 1940, investment advisers in compliance with such rules as
amended shall not be subject to enforcement action by the Bureau for violation
of this section to the extent that the violation results solely from the
investment adviser's compliance with the amended SEC rules.
(j) Every investment adviser doing business
within this State and that has its principal place of business in a state other
than this State shall be exempt from the requirements of this section, provided
the investment adviser is licensed in such other state and is in compliance
with such other state's recordkeeping requirements.
