Texas Administrative Code
Title 7 - BANKING AND SECURITIES
Part 7 - STATE SECURITIES BOARD
Chapter 116 - INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES
Section 116.5 - Minimum Records
Universal Citation: 7 TX Admin Code ยง 116.5
Current through Reg. 49, No. 38; September 20, 2024
(a) Records to be made by investment advisers. Persons registered as investment advisers whose principal place of business is located in another state shall maintain records at least in accordance with the minimum record-keeping requirements of that state. Persons registered as investment advisers whose principal place of business is located in Texas shall make and keep current the following minimum records or the equivalent thereof:
(1) 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.
(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. Such 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 such order; and shall
show the account for which entered, the date of entry, and the bank, broker, or
dealer by or through whom executed where appropriate. Orders entered pursuant
to the exercise of discretionary power shall be so designated.
(4) A list or other record of all accounts in
which the investment adviser is vested with any discretionary power with
respect to funds, securities, or transactions of any client.
(5) A copy of each notice, circular,
advertisement, newspaper article, investment letter, bulletin, or other
communication recommending the purchase or sale of a specific security, which
the investment adviser circulates or distributes, directly or indirectly, to 10
or more persons (other than investment supervisory clients or persons connected
with such investment adviser), and if such notice, circular, advertisement,
newspaper article, investment letter, bulletin, or other communication does not
state the reasons for such recommendation, a memorandum of the investment
adviser indicating the reasons therefor.
(6) In the case of any client receiving
investment supervisory or management service, to the extent that the
information is reasonably available to or obtainable by the investment adviser,
records showing separately for that client:
(A) the client's current position in any
security; and
(B) all securities
purchased and sold and the date, amount, and price of each purchase and
sale.
(7) In the case of
an investment adviser who has custody or possession of the funds or securities
of any client:
(A) a journal or other record
showing all purchases, sales, receipts and deliveries of securities (including
certificate numbers) for such accounts and other debits and credits to such
accounts;
(B) a separate ledger
account for each such client showing all purchases, sales, receipts, and
deliveries of securities, the date and price of each such purchase and sale,
and all debits and credits;
(C)
copies of confirmations of all transactions effected by or for the account of
any such client; and
(D) a record
for each security in which any client has a position, which record shall show
the name of each such client having any interest in each security, the amount
or interest of each such client, and the location of each such
security.
(8) A record
of every transaction in a security in which the investment adviser or any
investment adviser representative has, or by reason of such transaction
acquires any direct or indirect beneficial ownership, except:
(A) transactions effected in any account over
which neither the investment adviser nor any investment adviser representative
has any direct or indirect influence or control; and
(B) transactions in securities which are
direct obligations of the United States. Such 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. A transaction shall be recorded not later than 10
days after the end of the calendar quarter in which the transaction was
effected.
(9) For each
client, a record listing the client's:
(A)
birth year;
(B) employment status,
including occupation;
(C) annual
income;
(D) net worth, excluding
the value of the client's primary residence;
(E) investment objectives; and
(F) risk tolerance.
(10) For accounts in existence on the
effective date of this section, the investment adviser must obtain the
information required in paragraph (9) of this subsection within one year of
January 1, 2012, and thereafter must update this information for each client at
intervals not greater than 36 months.
(11) The internal control report that an
investment adviser is required to obtain or receive from its related person,
pursuant to §116.17(b)(6)(B).
(12) A memorandum describing the basis upon
which the investment adviser has determined that the presumption that any
related person is not operationally independent under §116.17(a)(7) has
been overcome.
(b) Records to be preserved by investment advisers.
(1) Persons registered as investment advisers
in Texas shall preserve all records required pursuant to subsection (a) of this
section 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 an easily accessible place.
(2)
Persons registered as investment advisers in Texas shall preserve for a period
of not less than three years from the end of the fiscal year during which the
last entry was made on such record, the first two years in an easily accessible
place:
(A) all checkbooks, bank statements,
cancelled checks, and cash reconciliations of the investment adviser;
(B) all bills or statements (or copies
thereof) paid or unpaid, relating to the business of the investment adviser as
such;
(C) all trial balances,
financial statements, and internal audit working papers relating to the
business of such investment adviser;
(D) originals of all written communications
received and copies of all written communications sent by such investment
adviser relating to:
(i) any recommendation
made or proposed to be made and any advice given or proposed to be
given;
(ii) any receipt,
disbursement, or delivery of funds or securities; or
(iii) the placing or execution of any order
to purchase or sell any security. Provided, however, 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 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 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 such notice, circular, or
advertisement is distributed to persons named on any list, the investment
adviser shall retain with the copy of such notice, circular, or advertisement a
memorandum describing the list and the source thereof;
(E) all powers of attorney and other
evidences of the granting of any discretionary authority by any client to the
investment adviser or copies thereof;
(F) all written agreements (or copies
thereof) entered into by the investment adviser with any client or otherwise
relating to the business of such investment adviser as such; and
(G) all complaints received from investment
clients, and all documents relating to such complaints.
(3) Persons registered as investment advisers
in Texas shall preserve for at least three years after the termination of the
enterprise partnership articles and any amendments thereto, articles of
incorporation, charters, minute books, and stock certificate books of the
investment adviser and of any predecessor.
(4) If a person ceases to be registered as an
investment adviser in Texas, such person shall, for the remainder of the time
period specified in this section, continue to preserve the records required in
this section.
(5) The records
required to be maintained and preserved pursuant to this section may be
immediately produced or reproduced on microfilm or other photograph and may be
maintained and preserved for the required time in that form, provided that such
microfilms or other photographs are arranged and indexed in such a manner as to
permit the immediate location of any particular document, and that such
microfilms or other photographs are at all times available for examination by
representatives of the Securities Commissioner together with facilities for
immediate, easily readable projection of the microfilm or other photograph and
for the production of easily readable facsimile enlargements.
(c) The records required to be maintained pursuant to this section may be maintained by any electronic storage media available so long as such records are available for immediate and complete access by representatives of the Securities Commissioner. Any electronic storage media must preserve the records exclusively in a non-rewriteable, non-erasable format; verify automatically the quality and accuracy of the storage media recording process; serialize the original and, if applicable, duplicate units of storage media, and time-date for the required period of retention the information placed on such electronic storage media; and have the capacity to download indexes and records preserved on electronic storage media to an acceptable medium. In the event that a records retention system commingles records required to be kept under this section with records not required to be kept, representatives of the Securities Commissioner may review all commingled records.
(d) The Securities Commissioner has a right to review all records maintained by registered investment advisers regardless of whether such records are required to be maintained under any specific applicable rule provision.
Disclaimer: These regulations may not be the most recent version. Texas may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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