INVESTMENT ADVISER REPRESENTATIVE

All investment adviser representatives who maintain an office within the state must register within the state. An investment adviser representative is an individual who:

• Gives advice on the value of the securities.

• Gives advice on the advisability of buying or selling securities.

• Solicits new advisory clients.

• Is an officer, director, partner, or supervisor of the investment adviser.

An investment adviser may not employ any representative who is not properly registered. Clerical and administrative employees are not considered representatives and do not need to register. An investment adviser representative who has no place of business in the state and who offers to meet a client in a hotel or other place of convenience is not considered to have an office in the state so long as the representative does not advertise the office and only offers the ability to meet directly to clients.

TESTFOCUS!

Investment adviser representatives who represent federally covered investment advisers must register with the state where they work as well as where they have clients, even though their firm is not reguired to register.

STATE INVESTMENT ADVISER REGISTRATION

An investment adviser must file the following with the state securities administrator before becoming registered:

• Application Form ADV

• Filing fees

• Consent to service of process

CAPITAL REQUIREMENTS

An investment adviser must maintain a minimal level of financial solvency. For advisers with custody of customers' cash and securities, the investment adviser must maintain minimum net capital of $35,000. Advisers who are unable to meet this requirement may post a surety bond. Deposits of cash and securities will alleviate the surety bond requirement. Advisers are considered to have custody if they have their customers' cash and securities held at their firm or if they have full discretion over their customers' accounts. Full discretion allows the adviser to withdraw cash and securities from the customer's account without consulting the customer. Advisers who have only limited discretionary authority over customers' accounts need to maintain a minimum of $10,000 in net capital. Advisers with limited discretionary authority may only buy and sell securities for the customer's benefit without consulting the customer. They may not withdraw or deposit cash or securities without the customer's consent. If a state registered investment adviser meets the capital requirements in its home state it will be deemed to have met the capital requirements in any other state in which the adviser wishes to register even if the other states have higher net capital or bonding requirements. Should a state registered adviser's net capital fall below the minimum requirement, the adviser must notify the state administrator by the close of the next business day of the adviser's net worth. The adviser must then file a financial disclosure report with the administrator by the end of the next business day. Investment adviser representatives are not required to maintain a minimum level of liquidity.

 
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