State Resources

Similar to other states, a firm seeking to register as a state registered investment advisor in California 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 California is required to send the miscellaneous documents identified below directly to the California Department of Corporations. Here is some additional information related to an investment advisor firm registering in California.

State of California’s Registration Fees:

• Investment Advisor Firm
  • Initial State Registration of Investment Advisor Firm: $125
  • Renewal State Registration of Investment Advisor Firm: $125
• Investment Adviser Representative
  • Initial Investment Adviser Representative Registration: $25
  • Renewal Investment Adviser Representative Registration: $0

Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV;
  • Sample investment advisory client agreement(s);
  • California Corporation or Limited Liability Company Securities Filing;
  • Customer Authorization of Disclosure of Financial Records (Form QR 500.261);
  • Balance sheet prepared with 45 days of filing for registration an in accordance with generally accepted accounting procedures;
  • Minimum Financial Requirements Worksheet – Form 260.237.2 and Verification Form 260.241.2(b)); and
  • Statement of Citizenship, Alienage, and Immigration Status (Form 250.61) (if sole proprietorship).
• Investment Adviser Representative
  • Form U4 for each investment adviser representative (IAR) and each officer, director or partner or each person who owns 10% or more of a California state registered investment advisor firm, as shown on Schedule A or B of Form ADV, not reported as an IAR or associated person.

Net Capital or Bonding Requirements

A California registered investment advisor firm with its principal place of business in California is subject to the following minimum financial requirements if the investment advisor firm (i) has custody of client funds or securities, (ii) has discretionary authority over client funds or securities or (iii) accept s prepayment of more than $500 per client and six or more months in advance:

1. A California registered investment advisor firm which has custody of client funds or securities must maintain at all times a minimum net worth of $35,000;
2. A California registered investment advisor firm which has discretionary authority over client funds or securities but does not have custody of client funds or securities must maintain at all times a minimum net worth of $10,000; and
3. A California registered investment advisor firm which accepts prepayment of more than $500 per client and six or more months in advance must maintain at all times a positive net worth.

A California registered investment advisor firm with its principal place of business in a state other than California should maintain minimum capital as required by the state in which the applicant maintains its principal place of business, provided the applicant is licensed or registered in such state and is in compliance with such state’s minimum capital requirements.  If a California registered investment advisor firm is not licensed or registered in the state where it maintains its principal place of business, the investment advisor firm is subject to California’s minimum financial requirements.

The minimum financial requirements do not apply to a California registered investment advisor firm that is also licensed as a broker-dealer under Code Section 25210.

An investment advisor firm registered or registering in California, which is subject to the minimum net worth requirements, is required to complete the Minimum Financial Requirements Worksheet. If a California registered investment advisor falls below 120% of the required minimum net worth, the California Department of Corporations has additional reports and requirements of such investment advisor firm.

Beyond the minimum net capital requirements described above, please refer to the California Code of Regulations with respect to what circumstances constitute an investment advisor firm registered in California having custody of client securities or funds and any additional requirements, forms and filings required of a California registered investment advisor firm with custody.

Additional Information

Investment Advisor Regulations from the California Department of Corporations

Similar to other states, a firm seeking to register as a state registered investment advisor in Colorado 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 Colorado is required to send the miscellaneous documents identified below directly to the Colorado Division of Securities. Here is a brief summary of certain requirements of an investment advisor firm registering in Colorado.

Registration Fees:

• Initial State Registration of Investment Advisor Firm: $80
• Renewal State Registration of Investment Advisor Firm: $80
• Investment Adviser Representative Registration: $16

Initial Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV; and
  • Investment advisory client agreement(s).
• Investment Adviser Representative
  • Form U4

Compliance Supervisor

Colorado requires investment advisor firms to designate one individual as having supervisory responsibilities over the investment adviser representatives of such investment advisor firm.

Net Capital or Bonding Requirements

There is currently no net capital or bonding requirement of an investment advisor firm registered with the Colorado Securities Division.

Custody Requirements

The only investment advisor firms required to file financial statements with the Colorado Securities Division are those firms that have custody of client funds and/or securities or those firms that have been specifically requested to submit financial statements by the Colorado Securities Division.

Colorado also follows the U.S. Securities and Exchange Commission’s custody requirements for an investment advisor:

No investment advisor with its principal office and place of business in this state or investment adviser representative of a licensed investment adviser with a place of business in this state shall take or maintain custody or possession of any funds or securities in which any client of such person has any beneficial interest unless:

(a) All of the securities of each client are segregated, marked to identify the particular client with any beneficial interest therein, and held in safekeeping in some place reasonably free from risk of loss, damage, or destruction; and

(b) (I) All of the funds of each client are deposited in one or more accounts, containing only clients’ funds, at a depository institution; and

(II) Each account is maintained in the name of the investment adviser or a federal covered adviser as agent or trustee for such clients; and

(III) A separate record is maintained for each such account that shows the name and address of the depository institution where the account is maintained, the dates and amounts of deposits to and withdrawals from the account, and the exact amount of each client’s beneficial interest in the account; and

(c) Written notification is sent to the client giving the place and manner in which the client’s funds or securities will be maintained immediately after the investment adviser or investment adviser representative accepts custody or possession of such funds or securities from the client and thereafter, if and when there is any change in the place or manner, written notification is sent to the client explaining the change; and

(d) An itemized statement is sent to each client, at least once every three months, that shows the client’s funds and securities in the custody or possession of the investment adviser or investment adviser representative at the end of the period and all debits, credits, and transactions affecting the funds and securities during the period; and

(e) A certified public accountant or, with the prior written consent of the client, a public accountant verifies all funds and securities of clients at least once during each calendar year through an actual examination. Such examination shall be at a time chosen by the accountant without prior notice to the investment adviser or investment adviser representative. The investment adviser shall file with the securities commissioner promptly after each such examination a certificate from the accountant in which such accountant avers to the commissioner that the accountant has performed an examination of the funds and securities accounts, and in which the accountant describes the nature and extent of the examination, and the results and conclusions reached.

(f) The investment adviser or investment adviser representative who has custody of client funds or securities posts bonds in amounts and with conditions the securities commissioner may by rule prescribe, subject to the limitations of section 222 (c) of the federal “Investment Advisers Act of 1940”. Any equivalent deposit of cash or securities shall be accepted in lieu of any bonds so required. Every bond shall provide for suit thereon by any person who has a cause of action under section 11-51-604 (3) and (5).

Additional Information

Colorado Department of Regulatory Agencies Division of Securities

Similar to other states, a firm seeking to register as a state registered investment advisor in Florida 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 Florida is required to send the miscellaneous documents identified below directly to the Florida Office of Regulation Division of Securities. Here is a brief summary of certain requirements of an investment advisor firm registering in Florida.

Registration Fees:

• Initial State Registration of Investment Advisor Firm: $200
• Renewal State Registration of Investment Advisor Firm: $200
• Investment Adviser Representative Registration: $50
• Branch Office Registration: $100

Initial Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV;
  • Certificate of Formation/Articles of Incorporation;
  • Balance Sheet dated no more than 90 days prior to the date of application (audited financial if investment advisor firm is deemed to have custody, or unaudited financials with notarized statement prepared in accordance with GAAP if investment advisor firm does not have custody);
  • Designation of qualifying principal;
  • Firm’s tax identification number;
  • Notarized Oath of Affirmation attesting to compliance with state securities regulations; and
  • Investment advisory client and solicitor agreement(s).
• Investment Adviser Representative
  • Form U4; and
  • Fingerprint Card.

Branch Office Registration

An investment advisor firm registered with Florida is required to register its branch offices in Florida using the Form BR.

Net Capital or Bonding Requirements

If the investment advisor firm has custody, then Florida Division of Securities requires the investment advisor firm to maintain net capital of $25,000. (If fee deduction is only form of custody, then there is no net capital requirement.) If the investment advisor firm does not have custody, then the Florida Securities Division requires the investment advisor to maintain net capital of $2,500 or $5,000 as prescribed by SEC Rule 15c-3.

Custody Requirements

If an investment advisor firm registered in Florida has custody, then the investment advisor firm is to file audited financials including a balance sheet, income statement, auditor’s report, and a statement of shareholder’s equity with the Florida Division of Securities.

Additional Information

Florida Office of Financial Regulation Division of Securities

Similar to other states, a firm seeking to register as a state registered investment advisor in Georgia 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 Georgia is required to send the miscellaneous documents identified below directly to the Securities Division of Georgia. Here is a brief summary of certain requirements of an investment advisor firm registering in Georgia.

State of Georgia’s Registration Fees:

• Initial State Registration of Investment Advisor Firm: $250
• Renewal State Registration of Investment Advisor Firm: $100
• Initial Investment Adviser Representative Registration: $250
• Renewal Investment Adviser Representative Registration: $100

Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV;
  • Sample advisory contract;
  • A Georgia registered investment advisor firm, which has custody of client’s funds or securities, or that requires payment of more than $500.00 in advisory fees per client six or more months in advance, must submit an audited balance sheet to the Georgia Securities Division; and
  • Fingerprint card

Compliance Manual

The Georgia Securities Division requires a state registered investment advisor firm to maintain a compliance manual.

Net Capital or Bonding Requirements

There is currently no explicit net capital or bonding requirement for an investment advisor firm registered with the State of Georgia.

Custody Requirements

An investment advisor firm registered with Georgia, which has custody of client funds or securities for the purpose of acting as an investment advisor or which requires payment of advisory fees six months or more in advance in excess of $500 per client, shall file with the Georgia Securities Commissioner an audited balance sheet as of the end of the investment advisor’s fiscal year end. Such balance sheet must be:

• Examined in accordance with generally accepted auditing standards and prepared in conformity with generally accepted accounting principles;
• Audited by an independent public accountant or an independent certified public accountant; and
• Accompanied by an opinion letter of the accountant concerning the report of financial position (i.e., balance sheet) and a note stating the principles used to prepare it, the basis of included securities, and any other explanations required for clarity.

A Georgia registered investment advisor that has custody of client securities and funds must provide:

1. A journal or other record showing all purchases, sales, receipts and deliveries of securities (including certificate numbers) for such accounts and all other debits and credits to such accounts.
2. A separate ledger account for each such 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 any such client.
4. A record for each security in which any such client has a position, which record shall show the name of each such client having any interest in such security, the amount or interest of each such client, and the location of each such security.

Additional Information

Securities Division of Georgia

Similar to other states, a firm seeking to register as a state registered investment advisor in Illinois 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 Illinois is required to send the miscellaneous documents identified below directly to the Illinois Securities Department. Here is a brief summary of certain requirements of an investment advisor firm registering in Illinois.

Registration Fees:

• Initial State Registration of Investment Advisor Firm: $400
• Renewal State Registration of Investment Advisor Firm: $400
• Investment Adviser Representative Registration: $150
• Branch Office Registration: $20 per branch (check payable to Illinois Secretary of State)

Initial Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV;
  • List of each branch office in Illinois (copy of Schedule D of Form ADV);
  • Balance sheet (prepared not more than 60 days prior to the date of filing the investment advisor firm’s application), which includes a statement signed by an officer of the investment advisor firm and discloses whether the investment advisor firm will retain custody or accepts prepayment of fees in excess of $500 per client and six or more months in advance;
  • Copy of articles of incorporation and by-laws, partnership agreement or other evidence of formation of the investment advisor firm;
  • A list of designated principal(s) to be responsible for the rendering of investment advice in Illinois and proof of passing the qualifying examination(s) and/or certification evidencing completion of a required education program for each designated principal who is responsible for rendering investment advice and supervision of each investment adviser representative in Illinois;
  • Investment Adviser Representation Under the Illinois Securities Law; and
  • Affidavit of Prior Investment Adviser Activities in Illinois
• Investment Adviser Representative
  • Form U4; and
  • Dual registration form (if individual intends to dually register as investment adviser representative and registered salesperson of broker-dealer).

Compliance Supervisor

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

Net Capital or Bonding Requirements

If an investment advisor firm registered with the Illinois Securities Department has custody (other than automatic fee deduction), then the investment advisor firm is required to maintain a net worth of $35,000.

Custody Requirements

Illinois also follows the U.S. Securities and Exchange Commission’s custody requirements for an investment advisor.

Additional Information

Illinois Securities Department

Similar to other states, a firm seeking to register as a state registered investment advisor in Michigan 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 Michigan is required to send the miscellaneous documents identified below directly to the Michigan Office of Financial and Insurance Regulation. Here is a brief summary of certain requirements of an investment advisor firm registering in Michigan.

Registration Fees:

• Initial State Registration of Investment Advisor Firm: $200
• Renewal State Registration of Investment Advisor Firm: $200
• Investment Adviser Representative Registration: $65

Initial Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV;
  • A Michigan Supplemental Application Form (listing anyone providing investment advice to Michigan clients);
  • An accrual basis, unaudited balance sheet (if investment advisor firm does not have custody) that is not older than 45 days, in accordance with generally acceptable accounting practices and has been signed by a an officer, partner or member of the investment advisor firm to certify the accuracy of the document;
  • Copy of articles of incorporation and by-laws, partnership agreement or other evidence of formation of the investment advisor firm; and
  • A copy of the investment advisory agreement that will be used for Michigan clients.
• Investment Adviser Representative
  • Form U4; and
  • A Michigan Consent & Guaranty Form C&S 8703 (if also registered in Michigan as a securities agent with a broker-dealer).

Net Capital or Bonding Requirements

An investment advisor firm registered with the Michigan Office of Financial and Insurance Regulation must be solvent (assets > liabilities) and meet obligations as they occur.

Custody Requirements

If the investment advisor firm has custody, then the Michigan Office requires audited financials. Michigan also follows the U.S. Securities and Exchange Commission’s custody requirements for an investment advisor.

Additional Information

Michigan Office of Financial and Insurance Regulation

Similar to other states, a firm seeking to register as a state registered investment advisor in New Jersey 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 New Jersey is required to send the miscellaneous documents identified below directly to the New Jersey Bureau of Securities. Here is some additional information related to an investment advisor firm initially registering in New Jersey.

State of New Jersey’s Registration Fees:

• Initial State Registration of Investment Advisor Firm: $200
• Renewal State Registration of Investment Advisor Firm: $200
• Initial Investment Adviser Representative Registration: $50
• Renewal Investment Adviser Representative Registration: $50

Forms and Information Required to Register:

• Investment Advisor Firm
  • Form ADV and any associated schedules;
  • If an investment advisor does not have custody, an uncertified balance sheet with a notarized certification dated within 60 days of the date of application to the New Jersey Bureau of Securities;
  • Sample investment advisory contract;
  • If applicable the investment advisor firm must submit a sample business card, letterhead, brochure, circular, advisory newsletter, form letter, advertisement, or sales literature intended for distribution to prospective clients;
  • URL for the investment advisor firm;
  • Designation of supervisor;
  • Certificate of formation/articles of incorporation; and
  • If New Jersey is not the investment advisor firm’s home state, then a written declaration that the investment advisor firm is in compliance with its home state’s requirements for books and records, bonding and net capital.
• Investment Adviser Representative
  • Form U4;
  • Independent contractor’s acknowledgement; and
  • A fingerprint card (if the investment adviser representative has not already supplied to FINRA for another IARD/CRD registration).

Net Capital or Bonding Requirements

If a New Jersey registered investment advisor firm has custody of client funds and securities, the New Jersey Bureau of Securities requires that the investment advisor firm maintain a minimum net capital of $25,000 at all times, or post a surety bond in the amount of $25,000.

Custody Requirements

A New Jersey registered investment advisor firm with custody must meet the minimum net capital requirements or post a surety bond. Upon annual renewal, an investment advisor firm with custody must also submit an audited balance sheet.

Additional Information

New Jersey Bureau of Securities

Our Blog Posts

“New Jersey Investment Advisor”

Similar to other states, a firm seeking to register as a state registered investment adviser in New Mexico 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 adviser in New Mexico is required to send the miscellaneous documents identified below directly to the New Mexico Registration and Licensing Department Securities Division. Here is a brief summary of certain requirements of an investment adviser firm registering in New Mexico.

Registration Fees

• Initial State Registration of Investment Adviser Firm: $300
• Renewal State Registration of Investment Adviser Firm: $300
• Investment Adviser Representative/Designation Principal Registration: $50
• Renewal Investment Adviser Representative Registration: $50

Initial Forms and Information Required to Register

Investment Adviser Firm

• Form ADV
• Financial Statements dated no more than 90 days prior to the application filing date. Investment advisers who will not have custody of client funds or securities may submit unaudited statements;
• Investment advisers who have custody of client funds or securities are required to provide a Securities Licensee’s Blanket Bond, New Mexico Form BF-2;
• If applicable, a list of all branch offices in New Mexico with the name, CRD number and qualifications of the designated principal;
• If the firm has more than one investment adviser representative, the Designation of at least one qualifying principal (name and CRD or social securit number). The designated principal must have the Series 24 qualification exam or one of these professional designations: CFA, CIC, CFP, ChFC, or PFS;
• A list of all investment adviser representatives to be registered in New Mexico and submission of a Form U4 for each individual to the IARD;
• If there is an affirmative response to Form ADV PArt 1, Item 8H, a specimen copy of the solicitor’s agreement and disclosure statement;
• A copy of the firm’s written procedures addressing a privacy policy and to prevent a violation of Rule 12.11.7.13(U) NMAC which includes the misuse of material nonpublic information by the investment adviser or its investment adviser representatives and employees; and
• Specimen copies of all investment advisory client agreement(s).

Investment Adviser Representative

• Form U4

Net Capital or Bonding Requirements

Every investment adviser must maintain a net worth of not less than $5,000. However, for investment advisers with discretionary authority, the net worth requirement is $10,000. Investment Advisers who have custody of customer’s funds or securities are required to maintain a net worth of $2,000,000 as described in Rule 12.11.5.23 or maintain a bond (Securities Licensee’s Blanket Bond, New Mexico Form BF-2, if applicable).

Additional Information

Investment Adviser Registration Packet | NM Securities Division

Similar to other states, a firm seeking to register as a state registered investment advisor in New York 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 New York is required to send the miscellaneous documents identified below directly to the New York Protection Bureau. Here is a brief summary of certain requirements of an investment advisor firm registering in New York.

State of New York’s Registration Fees:

• Initial State Registration of Investment Advisor Firm: $200
• Renewal State Registration of Investment Advisor Firm: $200
• Investment Adviser Representative Registration: $0

Forms and Information Required to Register:

• Investment Advisor Firm
  • Coversheet;
  • Form ADV;
  • Investment Advisor Qualification (if necessary); and
  • Income statement and balance sheet as of the close of its last fiscal or calendar year as prepared by the investment advisor’s accountant or by management. Where the financial statements submitted are more than ninety (90) days old, an interim balance sheet no more than ninety (90) days old shall also be submitted. (Affix the following language to each financial statement: “I do hereby certify that this is a true and complete financial statement” followed by an authorized signature or attach a CPA’s Audit report.)
• Investment Adviser Representative
  • The State of New York does not register investment advisor representatives (also known as “IARs”). Investment adviser representatives of New York state registered investment advisor firms must file the NY-IAQ with the New York Investor Protection Bureau. The New York Investor Protection Bureau does not require the filing of the Form U4. Investment adviser representatives of SEC registered investment advisor firms do not need to file the NY-IAQ with the New York Investor Protection Bureau.

Net Capital or Bonding Requirements

There is currently no explicit net capital or bonding requirement for an investment advisor firm registered with the State of New York.

Custody Requirements

If the only form of custody by the New York registered investment advisor firm is fee deduction from client accounts, the additional requirements of the investment advisor firm are the following:

• Journal or other record showing all purchases, sales, receipts and deliveries of securities (including certificate numbers) for such accounts and all other debits and credits to such accounts;
• Separate ledger account for each 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;
• Copies of confirmations of all transactions effected by or for the account of any such client;
• A record for each security in which any client has a position showing the name of each client having any interest in each security, the amount or interest of each such client, and the location of each security; and
• An invoice to the custodian and an invoice to the client

Additional Information

Investment Advisor Regulations from the New York Investor Protection Bureau

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