Pennsylvania Investment Advisor Firm & Investment Adviser Representative State Registration Requirements

Similar to other states, a firm seeking to register as a state registered investment advisor in Pennsylvania is required to file the Form ADV Part 1 and Part 2 along with any applicable schedule or appendix through the Investment Adviser Registration Depository (“IARD”) system and correspondingly pay in advance the registration fees via the IARD system. Additionally, a firm applying for state registration as an investment advisor in Pennsylvania is required to send the miscellaneous documents identified below directly to the Pennsylvania Securities Commission. Here is a brief summary of certain requirements of an investment advisor firm registering in Pennsylvania.

Registration Fees:

• Initial State Registration of Investment Advisor Firm: $350
• Renewal State Registration of Investment Advisor Firm: $350
• Investment Adviser Representative Registration: $120

Initial Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV;
  • Investment advisory client agreement;
  • Solicitor arrangement agreement and disclosure statement (if investment advisor firm utilizes third-party solicitors);
  • Code of ethics of investment advisor firm;
  • Undertaking (if investment advisor firm’s associated person is also licensed as registered representative of a broker/dealer) signed by an officer of the broker-dealer stating that the broker-dealer has reviewed and will comply with FINRA Rule 3040 of the Conduct Rules and Notice to Members 94-44;
  • Surety bond (if applicable as explained below); and
  • Balance sheet (audited if investment advisor firm has custody or accepts payment of $1,200 or more six months or more in advance) and computation of net worth showing proof of investment advisor firm’s compliance with the Pennsylvania’s minimum net worth requirements for a state registered investment advisor.
• Investment Adviser Representative
  • Form U4.

Compliance Supervisor

Pennsylvania requires investment advisor firms to designate individual(s) as having supervisory responsibilities over the investment adviser representatives of such investment advisor firm.

Net Capital, Custody & Bonding Requirements

If a Pennsylvania registered investment advisor firm with its principal place of business in Pennsylvania accepts pre-payment of investment advisory fees six months or more in advance, then the investment advisor firm will maintain a positive net worth at all times.

If a Pennsylvania registered investment advisor firm with its principal place of business in Pennsylvania has discretion and but not custody (other than automatic fee deduction), then the investment advisor firm is required to maintain a net worth of $10,000.

If a Pennsylvania registered investment advisor firm with its principal place of business in Pennsylvania has custody (other than custody due only to automatic fee deduction subject to written client authorization and detailed invoice sent to client), then the investment advisor firm is required to maintain a net worth of $35,000.

If a state registered firm does not have its principal place of business in Pennsylvania, then the Pennsylvania Securities Commission’s minimum net worth requirements will be the same as the net worth requirements of the state of its principal place of business.

If an investment advisor firm serving Pennsylvania clients is not registered as an investment advisor in the state of its principal place of business (or SEC registered), then the Pennsylvania Securities Commission’s net worth requirements will apply to the investment advisor firm not registered with the securities regulator of its principal place of business.

An investment advisor firm that does not meet the Pennsylvania Securities Commission’s minimum net worth requirements by maintaining a surety bond in the amount of the net worth deficiency rounded up to the nearest $5,000. The surety bond shall be filed with the Pennsylvania Securities Commission on Uniform Surety Bond Form (Form U-SB).

If a Pennsylvania registered investment advisor firm that has discretionary authority over client funds or securities, but not custody, to file an unaudited balance sheet (no older than 45 days), which will be prepared in accordance with generally accepted accounting principles and include a representation by the investment advisor firm that the balance sheet is true and accurate.

An investment advisor firm that has custody of client funds or securities or an investment advisor firm that accepts payment of advisory fees six (6) months or more in advance and in excess of $1,200 per client will file an audited balance sheet (no older than 45 days) of the investment advisor firm prepared in accordance with generally accepted accounting principles and accompanied by a standard audit report containing an unqualified opinion of an independent certified public accountant. The accountant will submit, as a supplementary opinion, comments based upon the audit as to material inadequacies found to exist in the accounting system, the internal accounting controls and the procedures for safeguarding securities and funds and shall indicate corrective action taken or proposed. If that balance sheet is as of a date more than 45 days prior to the date of filing the application, the investment advisor firm also shall file a subsequent balance sheet prepared in accordance with generally accepted accounting principles as of a date within 45 days of the date of filing; this subsequent balance sheet may be unaudited and may be prepared by management of the investment advisor firm.

Once an investment advisor firm is registered with the Pennsylvania Securities Commission, an investment advisor firm with custody or discretion must annually file the balance sheet (audited if investment advisor firm has custody) within 120 days of the investment advisor firm’s fiscal year end.

Additional Information

Pennsylvania Securities Commission