This entry of “Year-End Compliance Tips” focuses on the updating of financial information. If your advisor firm is registered with one or more states, you may be required to submit certain financial statements to the state regulators on an annual basis. Many states have certain net worth or net capital requirements. Some states also have surety bond requirements. Most states that have these provisions require advisor firms to substantiate they are in compliance with the rules by submitting financial statements. In some cases the financial statements must be submitted at the end of the firm’s fiscal year and in some states the financial records must be submitted at the end of the calendar year. In addition to any forms the firm may have to submit directly to regulators, it is essential the firm has updated all of its financial records under the regulatory books and records requirements. This is true for state and SEC registered advisor firms. For example, SEC registered firms are required to keep the following as part of their books and records (Investment Advisers Act of 1940, Rule 204-2):
– A journal or journals, including cash receipts and disbursements,
records, and any other records or original entry forming the basis of
entries in any ledger.
– General and auxiliary ledgers (or other comparable records) reflecting
asset, liability, reserve, capital, income and expense accounts.
– All check books, bank statements, cancelled checks and cash
reconciliations of the investment adviser.
– All trial balances, financial statements, and internal audit working
papers relating to the business of such investment adviser.
While many states have requirements similar to that of the SEC, it is important to check with your home state’s specific financial recordkeeping requirements. If you have questions or concerns regarding your regulatory obligations, please call our firm for a confidential discussion today.