INSTRUCTIONS FOR COMPLETING AND FILING APPLICATION FOR INVESTMENT ADVISER CERTIFICATE ON FORM ADV (Uniform Application for Investment Adviser Registration)(17 CFR 279.1)
(Only for use in connection with applications for an investment adviser certificate pursuant to Corporations Code Section 25231)
The following is provided as instructions to file your application for an investment adviser certificate. Please make sure that the following documentation is filed as part of your application. Please note that reference may be made to the California Code of Regulations (“CCR”) and California Corporations Code (“Code”). The CCR (rules) and the Code (law) may be found through links on our web site.
1. FORM ADV AND FILING FEE
Form ADV (Part 1) - Part 1A and Part 1B of Form ADV must be completed in accordance with the form instructions and filed directly with the Investment Adviser Registration Depository (“IARD”). To file electronically you need to obtain the State Registrant Entitlement Packet from the IARD web site. By completing the Entitlement Forms and returning the forms to IARD, you are requesting the Financial Industry Regulatory Authority ("FINRA") to entitle you to access the IARD system for electronic filing. Once FINRA receives the Entitlement Forms, they will establish your IARD User Account and you will be able to access and use the IARD system. Additional information on the IARD system may be found on the IARD web site.
Form ADV (Part 2) - Part 2 of Form ADV must be completed in its entirety and filed directly with IARD. IARD system instructions for filing Part 2 of Form ADV can be found on the IARD web site. Part 2 of Form ADV must be formatted as a text-searchable PDF file before it can be submitted to the IARD system. Part 2 of Form ADV in PDF format is available on the North American Securities Administrators Association ("NASAA") website. If using Part 2 of Form ADV from this website, please carefully read “A Guide for Electronic Filing of the ADV Part II” found on the NASAA website.
The Filing Fee - The fee for filing an application is $125 and is to be paid directly to IARD in accordance with its procedures. Fees are not refundable except as provided in Government Code Sections 13140-13144. Note: The filing fee does not apply to any applicant that is also Licensed as a broker-dealer under Corporations Code (“Code”) Section 25210.
2. ADDITIONAL DOCUMENTATION/INFORMATION
- Form U-4 and Reporting Fee: Form U-4 and the $25 reporting fee for each investment adviser representative (“IAR) or associated person as defined in Code Section 25009.5(a) should be filed with the Central Registration Depository (“CRD”). Note: Each officer, director or partner exercising executive responsibility (or persons occupying a similar status or performing similar functions) or each person who owns 25% or more is presumed to be acting as an investment adviser representative or associated person.
- Page 1, and pages 7 through 13 of Form U-4 for each officer, director or partner or each person who owns 10% or more, as shown on Schedule A or B of Form ADV, not reported as an investment adviser representative (“IAR”) with CRD, should be filed directly with the Commissioner. If the individual’s Form U-4 is on file with CRD and the information reported on Form U-4 is current, please make representation to that fact and it will not be necessary to file a paper version of Form U-4 directly with the Commissioner.
- Customer Authorization of Disclosure of Financial Records (Form QR 500.261): Form QR 500.261 should be completed and provided to the Commissioner as part of your original application package. Pursuant to CCR Section 260.231 (i), the form must be typewritten and an original signature must be provided. The form should be mailed directly to the Department.
- Financial Information: If you have custody of client funds or securities, discretionary authority over client funds or securities, or accept prepayment of more than $500 per client and six or more months in advance and your principal place of business is in California, a Statement of Financial Condition (Balance Sheet) and a worksheet that demonstrates compliance with the capital requirements as found in CCR § 260.237.2 and Verification Form should be filed directly with the Commissioner. The Balance Sheet should be dated no later than 45 days prior to the filing of the application and prepared in accordance with generally accepted accounting principles. The balance sheet need not be audited. For the worksheet to demonstrate compliance with the minimum financial requirements, you may use the Minimum Financial Requirements Worksheet (Form 260.237.2).
If your principal of business is in a state (home) other than California, and you are Licensed or registered in your home state and are in compliance with your home state’s capital requirements, you are not subject to the minimum financial requirement as found in CCR Section 260.237.2. If you are not Licensed or registered in the state where you maintain your principal place of business, or if you are not in compliance with your home state’s capital requirement, you are subject to California’s minimum financial requirements. Note: This requirement does not apply if you are also Licensed as a broker-dealer in California.
- Advisory Contract(s): CCR Section 260.238 (n). A sample copy of each written investment advisory contract should be filed directly with the Commissioner. The contract(s) should disclose: (1) the services to be provided; (2) the term of the contract; (3) the advisory fee or the formula for computing the fee; (4) the amount, or the manner of calculation of the amount, of the prepaid fee to be returned in the event of contract termination or nonperformance; (5) whether the contract grants discretionary power to the adviser or its representatives; and (6) that the contract will not be assigned by the investment adviser without the consent of the client.
In the event the advisory contract grants the adviser or its representatives discretionary power to transact on behalf of clients through a third party custodian, a copy of the custodial agreement should also be filed directly with the Commissioner.
If you do not have discretionary authority to place trade orders with a broker-dealer pursuant to a third party trading agreement, the contract should acknowledge that the investment adviser must secure client permission prior to effecting securities transactions for the client on a non-discretionary basis in the client’s broker-dealer account(s).
- Proof of Compliance with Qualification Requirements: If you are filing as a sole proprietor, proof of compliance with the qualification requirements found in CCR Section 260.236 should be filed directly with the Commissioner, if such information is not available on CRD.
- Statement of Citizenship, Alienage, and Immigration Status: If you are filing as a sole proprietor, a Statement of Citizenship, Alienage, and Immigration Status (Form 250.61) is to be completed. This form is to be maintained, along with any documents establishing proof thereof, as part of your books and records. This form should be provided to the Commissioner upon request.
- Securities Filing: If you are organized as a California corporation or limited liability company, the offer and sale of securities in your corporation or limited liability company (if applicable) must be qualified, unless exempt. If exempt, you should file the appropriate limited/small offering exemption notice. Please contact our Customer Services Office at 1-866-275-2677 for further information.
- Other Filing Information - Forms filed directly with the Commissioner should be mailed to Department of Business Oversight, 1515 K Street, Suite 200, Sacramento, CA, 95814-4052.
For the purposes of CCR Section 250.51, an application for a certificate as an investment adviser is not considered filed until the required fee and all required submissions are received by the Commissioner.
The filing of Form ADV with IARD does not constitute automatic approval. The applicant should not consider the application approved until approved by the Commissioner and the approval has been received through IARD.