Section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-2(a)(11)), defines an “investment adviser” as “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.”
Investment advisers are subject to rigorous books and records maintenance requirements in order to comply with state and/or federal law, noted Todd Genger, a leading independent compliance consultant. An investment adviser is generally required to maintain and keep current the records listed below:
Receipts and Disbursements Journals
General Ledger
Order Memoranda
Bank Records
Bills and Statements
Financial Statements
Written Communications and Agreements (including electronic transmissions)
List of Discretionary Accounts
Advertising
Personal Transactions of Representatives and Principals
Disclosure Statements
Solicitors’ Disclosure Statements
Performance Claims
Customer Information Forms and Suitability Information
Written Supervisory Procedures
For investment advisers who have custody or control of client assets or manage client assets, Todd Genger recommends that advisers maintain and keep current the following records:
Journals of Securities Transactions and Movements
Separate Client Ledgers
Copies of Confirmations
Record by Security Showing Each Client’s Interest and Location Thereof
Client Purchases and Sales History
Current Client Securities Position
In light of several high-profile frauds and Ponzi schemes that have been uncovered over the past several years, including the infamous Madoff scandal, Todd Genger has found that securities regulators are closely scrutinizing firm books and records to ensure that written policies and procedures relating to custody and control of funds and securities are aligned with firm practices.