A. An investment adviser that has its principal place of business in the Commonwealth of Pennsylvania and has custody of client funds or securities shall maintain at all times a minimum net worth of $35,000 unless the investment adviser meets any of the following:
The investment adviser has custody solely as a result of receiving fees directly deducted from clients’ funds or securities if the investment adviser:
Possesses written authorization from the client to deduct advisory fees from an account held by a qualified custodian.
Sends the qualified custodian written notice of the amount of the fee to be deducted from the client’s account.
Sends the client a written invoice itemizing the fee, including any formulae used to calculate the fee, the time period covered by the fee and the amount of assets under management on which the fee was based.
B. The investment adviser has custody solely as a result of serving as a general partner, manager of a limited liability company or a person occupying a similar status or performing a similar function which gives the investment adviser or its supervised person legal ownership or access to client funds or securities if:
The pooled investment vehicle is subject to audit at least annually and distributes its audited financial statements which have been prepared by an independent certified public accountant in accordance with generally accepted accounting principles to all limited partners, members or beneficial owners within 120 days of the end of its fiscal year.
The investment adviser:
Hires an independent party to review all fees, expenses and capital withdrawals from the accounts included in the pooled investment vehicle prior to forwarding them to the qualified custodian with the independent party’s approval for payment.
Sends written invoices or receipts to the independent party which describe the amount of the fees (including any formulae used to calculate the fees, the time period covered by the fees and the
amount of assets under management on which the fees were based), expenses or capital withdrawals for the independent party to verify that payment of the fees, expenses or capital withdrawals is in accordance with the documents governing the operation of the pooled investment vehicle and any statutory requirements applicable thereto.
The investment adviser has custody solely as a result of acting as trustee for a beneficial trust in which the beneficial owners of the trust are a parent or step-parent; grandparent or step-grandparent; spouse, brother or step-brother, sister or step-sister; or grandchild or step-grandchild of the investment adviser.
C. An investment adviser that has its principal place of business in the Commonwealth of Pennsylvania and has discretionary authority over client funds or securities but does not have custody of client funds or securities shall maintain at all times a minimum net worth of
$10,000. An investment adviser will not be deemed to be exercising discretion and subject to the requirements of this paragraph when it places trade orders with a broker-dealer under a third-party trading agreement if:
The investment adviser has executed a separate investment adviser contract exclusively with its clients that acknowledges that a third-party agreement will be executed to allow the investment adviser to effect securities transactions for the client in the client’s broker-dealer account.
The investment adviser contract specifically states that the client does not grant discretionary authority to the investment adviser and the investment adviser, in fact, does not exercise discretion with respect to the account.
A third-party trading agreement is executed between the investment adviser, the client and the broker-dealer which specifically limits the investment adviser’s authority in the client’s broker-dealer account to the placement of trade orders and deduction of investment adviser fees.
D. An investment adviser that has its principal place of business in the Commonwealth of Pennsylvania and accepts prepayment of advisory fees of more than 6 months in advance and more than $1,200 per client shall maintain at all times a positive net worth.
E. The following applies when an investment adviser has its principal place of business in a state other than the Commonwealth of Pennsylvania:
If the investment adviser currently is licensed as an investment adviser in the state in which it maintains its principal place of business and is in compliance with that state’s net worth requirements, the net worth required by this section shall be the same as the net worth requirement imposed by that state.
If the investment adviser currently is not licensed as an investment adviser in the state in which it maintains its principal place of business, the net worth required by this section shall be the same as if the investment adviser had its principal place of business in the Commonwealth of Pennsylvania.
VI. REGISTER INVESTMENT ADVISER REPRESENTATIVES
File a Form U-4 for all individuals in the advisory firm who provide investment advisory services.
Important Note: At present, Pennsylvania does not require investment adviser representatives to be fingerprinted.
VII. POST-REGISTRATION REQUIREMENTS
Conform existing compliance manual to the Pennsylvania Code.
VIII. WITHDRAW FROM SEC REGISTRATION
Important Note: A transitioning investment adviser should begin the withdrawal process only once the adviser has been informed that their state registration is effective.
STATE REGISTRATION FACT SHEET—PENNSYLVANIA Page 181 of 235 Step 1. Access Form ADV-W
A. Log on to your firm’s IARD account. B. Select IARD Main Tab.
C. In the “Forms” column under “ADV-W” select “New Filing.” D. On “ADV-W—New Filing Page,” select “Partial Withdrawal.”
Step 2. Complete the Status Section
The first section of the Form ADV-W is entitled “Status.” The answer to the question “check the box that indicates what you would like to do” should already have been answered as follows: “withdraw from registration in some, but not all, of the jurisdictions with which you are registered.” If, for some reason, this answer has not been selected, it should be checked off. The next question in the Status section asks the adviser to indicate the jurisdictions from which it is withdrawing its investment adviser registration. Select choice “(a),” which will signify your advisory firm’s withdrawal from the SEC.
Step 3. Complete Items 1A Through 1D
Important Note: Your advisory firm should not complete Item 1E or Items 2 through 8 of Form ADV-W.
Step 4. Sign the Execution Page and Submit IX. IMPORTANT INFORMATION
The information contained in this section is believed to be accurate and current as of July 20, 2011, but no representation or warranty is made about its accuracy, completeness, or currency. It is only a
summary of the rules and regulations that apply to investment advisers registering in the covered state. It is not intended to be either a comprehensive analysis or a substitute for an in-depth review of the rules and regulations applicable to investment advisers in the covered state. It is not intended to constitute legal or regulatory compliance advice or to apply to any investment adviser’s particular situation. U.S. Compliance Consultants is independent of and not affiliated with or an agent or representative of Schwab, and Schwab does not endorse its services. Schwab did not independently verify the information in this document and makes no representation or warranty about the accuracy of the information.
RHODE ISLAND