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02.02.05.00.htm 02.02.05.00. Title 02 OFFICE OF THE ATTORNEY GENERAL Subtitle 02 DIVISION OF SECURITIES Chapter 05 Investment Adviser Regulations Authority: Corporations and Associations Article, §11-101, 11-203, and 11-302, Annotated Code of Maryland
02.02.05.01.htm 02.02.05.01. 01 Definitions.. A. As used in the Maryland Securities Act, Corporations and Associations Article, §11-101(h) Annotated Code of Maryland, the following terms have the meanings indicated.B. Terms Defined.. 1) "Compensation" means a form of payment or consideration, whether direct or indirect or in the form of cash or other benefits, that is paid or conveyed to or for the benefit of the investment adviser in connection with the rendering of the investment advisory services desc
02.02.05.02.htm 02.02.05.02. 02 Indirect Consideration.. A. The antifraud provisions of the Maryland Securities Act, Corporations and Associations Article, §11-302(a) Annotated Code of Maryland, apply to a person who receives consideration indirectly from another person for:1) Advising the person as to the value of securities or their purchase or sale; or. 2) Acting as an investment adviser or investment adviser representative.. B. For purposes of this regulation and the Maryland Securities Act, Corpora
02.02.05.03.htm 02.02.05.03. 03 Dishonest or Unethical Practices.. A. Definitions. As used in this regulation, the following terms have the meanings indicated:. 1) "Affiliate" has the meaning stated in §2(a)3) of the Investment Company Act of 1940.. 2) "Found" means determined or ascertained by adjudication or consent in a final court action, administrative proceeding, or SRO proceeding.3) "Investment-related or financially related" means pertaining to investment advisory or financial planning services, counse
02.02.05.04.htm 02.02.05.04. 04 Custody of Client Funds or Securities.. A. Conditions of Custody. As provided in the Maryland Securities Act, Corporations and Associations Article, §11-302(f) Annotated Code of Maryland, it is unlawful for an investment adviser to take or have custody of securities or funds of a client unless:1) The investment adviser notifies the Commissioner in writing that the investment adviser has or may have custody, which notification may be given on Form ADV;2) The securities of each
02.02.05.05.htm 02.02.05.05. 05 Information to be Furnished to Clients (Brochure Rule". A. Unless otherwise provided in this regulation, an investment adviser may fulfill the disclosure requirements of the Maryland Securities Act, Corporations and Associations Article, §11-302(d) and 11-411(b) Annotated Code of Maryland, by complying with the provisions of §204 of the Investment Advisers Act of 1940 and the rules, regulations, and interpretive releases promulgated under it with respect to Form ADV. Taken tog
02.02.05.06.htm 02.02.05.06. 06 Agency Cross Transactions.. A. Definition. For purposes of this regulation, "agency cross transaction for an advisory client" means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, or a person controlling, controlled by, or under common control with the investment adviser, including an investment adviser representative, acts as a broker-dealer for both the client and another person on the other side
02.02.05.07.htm 02.02.05.07. 07 Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-302(a)4) for Certain Broker-Dealers.A. Definitions. As used in this regulation:. 1) "Publicly distributed written materials" means written materials that are distributed to 35 or more persons who pay for those materials;2) "Publicly made oral statements" means oral statements made simultaneously to 35 or more persons who pay for access to those statements.B. Exemption from §11-302
02.02.05.08.htm 02.02.05.08. 08 Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-302(e)1)i) for Performance-Based Compensation.A. Definitions. As used in this regulation:. 1) "Affiliate" has the meaning stated in §2(a)3) of the Investment Company Act of 1940.. 2) "Client's independent agent" means a person who agrees to act as an investment advisory client's agent in connection with the contract, but does not include:a) The investment adviser relying on this regulation;.
02.02.05.09.htm 02.02.05.09. 09 Transactions Considered Not to be Assignments.. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-302(e)1)ii) Annotated Code of Maryland, a transaction that does not result in a change of actual control or management of an investment adviser is not an assignment.
02.02.05.10.htm 02.02.05.10. 10 Electronic Filing with Designated Entity.. A. Designation. Pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-405(a) Annotated Code of Maryland, the Commissioner designates the web-based Investment Adviser Registration Depository (IARD) operated by the Financial Industry Regulatory Authority to receive and store filings and collect related fees from investment advisers and investment adviser representatives on behalf of the Commissioner.
02.02.05.11.htm 02.02.05.11. 11 Applications for Investment Advisers and Notice Filings for Federal Covered Advisers.. A. Application Form for Investment Adviser Registration.. 1) Initial Application. An application for initial registration as an investment adviser shall be made by completing Form ADV (Uniform Application for Investment Adviser Registration) in accordance with the form instructions and by filing the form with the IARD. The application for initial registration shall also include the following:
02.02.05.12.htm 02.02.05.12. 12 Initial and Renewal Registration as Investment Adviser Representative.. A. Method of Filing. Until the IARD is capable of accepting applications to register investment adviser representatives, an application for initial or renewal registration as an investment adviser representative shall be submitted in accordance with §C of this regulation. When the IARD is capable of accepting applications to register investment adviser representatives, an application for initial a
02.02.05.13.htm 02.02.05.13. 13 Investment Adviser Supervision.. A. An investment adviser registered or required to be registered in this State shall establish, maintain, and enforce written supervisory guidelines that are reasonably designed to:1) Supervise the activities of an investment adviser representative and associated person to achieve compliance with the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, and the regulations promulgated under it; and
02.02.05.14.htm 02.02.05.14. 14 Examination Requirements for Investment Advisers and Investment Adviser Representatives.. A. General Provisions.. 1) An investment adviser or investment adviser representative registered or required to be registered in this State shall:a) Pass with a score of 70 or better the examination or examinations designated by the Commissioner;. b) Qualify for an exemption from the examination requirement under §C or D of this regulation; or.
02.02.05.15.htm 02.02.05.15. 15 Financial Requirements for Certain Investment Advisers.. A. For purposes of this regulation, the following terms have the meanings indicated:. 1) "Net assets" means the excess of assets over liabilities, as determined by generally accepted accounting principles.2) "Net capital" has the meaning stated in 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers and Dealers)3) "Tangible net assets" means the net assets of an investment adviser regi
02.02.05.16.htm 02.02.05.16. 16 Record-Keeping Requirements for Investment Advisers.. A. An investment adviser registered or required to be registered in this State shall maintain and preserve the following books, ledgers, and records:1) A journal or journals, including cash receipts and disbursements records, and any other records of original entry forming the basis of entries in any ledger.2) General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve,
02.02.05.17.htm 02.02.05.17. 17 Financial Reporting Requirements for Certain Investment Advisers.. A. A registered investment adviser that has custody of client funds or securities, or requires payment of advisory fees 6 months or more in advance and in excess of $500 per client, shall file with the Commissioner an audited balance sheet as of the end of the investment adviser's fiscal year. Each balance sheet filed under this regulation shall be:1) Audited by an independent certified public accountant;.
02.02.05.18.htm 02.02.05.18. 18 Correction of Documents Filed by Investment Advisers and Investment Adviser Representatives.. A. Scope. This regulation governs amendment filings for investment advisers and investment adviser representatives that have not yet transitioned onto the IARD. Investment advisers and investment adviser representatives that have transitioned onto the IARD shall comply with Regulations .11A(3) and .12A(3) of this chapter.B. An amendment to an investment adviser's filings
02.02.05.19.htm 02.02.05.19. 19 Withdrawal of Investment Adviser and Investment Adviser Representative Registrations.. A. Investment Adviser. An application for withdrawal of registration or of an application to register as an investment adviser shall be made by completing Form ADV-W (Notice of Withdrawal from Registration as Investment Adviser) in accordance with the form instructions and by filing the form with the IARD.B. Investment Adviser Representative. An application for withdrawal of regi
02.02.05.20.htm 02.02.05.20. 20 Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-101(i)2) Annotated Code of Maryland, for Certain Individuals.Under the Maryland Securities Act, Corporations and Associations Article, §11-101(i)2) Annotated Code of Maryland, an investment adviser representative does not include:A. An individual broker-dealer agent who:. 1) In conjunction with the agent's employment or affiliation with a broker-dealer, holds out to the
02.02.05.21.htm 02.02.05.21. 21 Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-101(h)2)iii)3, Annotated Code of Maryland, for Certain Individuals.For the purposes of the Maryland Securities Act, Corporations and Associations Article, §11-101(h)2)iii)3, Annotated Code of Maryland, a certified public accountant or certified public accounting firm (CPA) is not considered to "hold out" as an investment adviser if the CPA limits his or her holding out as an investment adv
02.02.05.22.htm 02.02.05.22. 22 Cancellation of Investment Adviser and Investment Adviser Representative Applications.. A. Abandonment of Application. For purposes of this regulation and the Maryland Securities Act, Corporations and Associations Article, §11-414, Annotated Code of Maryland, an application is considered abandoned if the applicant has failed to pursue the application for initial registration in a diligent manner.B. Notice of Proposed Cancellation. Before the Commissioner cancels an appl
02.02.05.9999.htm 02.02.05.9999. Administrative History Effective date:. Regulations .01―09 adopted as an emergency provision effective July 25, 1989 (16:16 Md. R. 1733) emergency status expired December 22, 1989Regulations .01―09 adopted as an emergency provision effective December 23, 1989 (17:1 Md. R. 63) adopted permanently effective April 16, 1990 (17:7 Md. R. 845)Regulation .05 amended and Regulations .10―18 adopted as an emergency provision effective August 1, 1990 (17:15 Md. R. 1845)
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