1. (a) Records and reports of broker-dealers.

   1. (1) Each broker-dealer shall make, maintain, and preserve books and records as required for brokers or dealers under the rules promulgated under the Securities Exchange Act of 1934, as amended.
   2. (2) The Securities Commissioner may, by order, upon written request and for good cause shown, waive any of the requirements of this section.

2. (b) Records and reports of investment advisers.

   1. (1) General.

      1. (A) All registered investment advisers shall make and keep true, accurate, and current books and records relating to their investment advisory business.
      2. (B) The records required to be maintained shall be maintained for a minimum of five (5) years from the date on which the transaction occurred and shall include the specific records set forth below.
      3. (C) The provisions of this section shall not apply to an investment adviser whose principal place of business is located in a state other than Arkansas, provided that the investment adviser is registered or licensed as an investment adviser in that other state and is in compliance with the applicable books and records requirements of that other state.

   2. (2) Business records. The business records required to be maintained shall include:

      1. (A) 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. (B) General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income, and expense accounts;
      3. (C)

3. (i) A memorandum of each order given by the investment adviser for the purchase or sale of any security, of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt of delivery of a particular security, and of any modification or cancellation of any such order or instruction.

   1. (ii) Such memoranda shall:

4. (a) (a) Show the term and conditions of the:

   1. (1) (1) Order;
   2. (2) (2) Instruction;
   3. (3) (3) Modification; or
   4. (4) (4) Cancellation;

5. (b) (b) Identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed the order; and

   1. (c) (c) Show the account for which entered, the date of entry, and the bank or broker-dealer by or through whom executed where appropriate.

      1. (iii) Orders entered pursuant to the exercise of discretionary power shall be so designated;
      2. (D) All checkbooks, bank statements, canceled checks, and cash reconciliations of the investment adviser;
      3. (E) All bills or statements (or copies thereof) paid or unpaid, relating to the business of the investment adviser as such;

      4. (F)

         1. (i) All trial balances, financial statements prepared in accordance with generally accepted accounting principles, and internal audit working papers relating to the business of the investment adviser.
         2. (ii) For purposes of this section, “financial statements” means a balance sheet prepared in accordance with generally accepted accounting principles, and income statement, a cash flow statement, and a net worth computation as required by 23 CAR § 300-304(b);

      5. (G)

         1. (i) Originals or electronic copies of all written communications received and copies of all written communications sent by such investment adviser relating to the following:
6. (a) (a) Any recommendation made or proposed to be made and any advice given or proposed to be given;

7. (b) (b) Any receipt, disbursement, or delivery of funds or securities; or

   1. (c) (c) The placing or execution of any order to purchase or sell any security.

      1. (ii) Notwithstanding the provisions of this subsection, an investment adviser shall not be required to keep the following:
8. (a) (a) Any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser; and

9. (b) (b) A record of the names and addresses of the persons to whom any notice, circular, or other advertisement offering any report, analysis, publication, or other investment advisory service to more than ten (10) persons was sent, unless the notice, circular, or other advertisement is distributed to persons named on any list, in which case, the investment adviser shall retain with the copy of the notice, circular, or other advertisement, a memorandum describing the list and the source thereof;

   1. (H) A list or other record of all accounts in which the investment adviser is vested with custody or any discretionary power with respect to the funds, securities, or transactions of any client;

      1. (I) All powers of attorney and other evidences of the granting of any discretionary authority by any client to the investment adviser, or copies thereof;

      2. (J)

         1. (i) All investment advisory contracts and other written agreements, or copies thereof, entered into by the investment adviser with any client or otherwise relating to the business of the investment adviser.
         2. (ii) The contracts shall be fair and reasonable and indicate the customer’s risk tolerance, investment objectives, annual income, net worth, and liquid net worth, and shall be signed and dated by all persons having an interest in the account;
      3. (K) A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication which the investment adviser circulates or distributes, directly or indirectly, to two (2) or more persons, other than persons connected with the investment adviser, and all documentation necessary to show the investment adviser is not in violation of 23 CAR § 300-310(b)(4)(M);

      4. (L)

         1. (i) A record of every transaction in a security in which the investment adviser or any advisory representative of the investment adviser has, or by reason of the transaction acquires, any direct or indirect beneficial ownership.
         2. (ii) These records shall state the:
10. (a) (a) Title and amount of the security involved;

11. (b) (b) Date and nature of the transaction, including the purchase, sale, acquisition, or disposition;

    1. (c) (c) Price at which it was effected; and

       1. (d) (d) Name of the broker-dealer through which the transaction was effected.

          1. (iii) These records may also contain a statement declaring that the reporting or recording of a transaction shall not be construed as an admission that the investment adviser or representative has any direct or indirect beneficial ownership in the security.
          2. (iv) A transaction shall be recorded not later than ten (10) days after the end of the calendar quarter in which the transaction was effected.
          3. (v) The records required by this subdivision (b)(2)(L) shall not include the following:
12. (a) (a) Transactions effected in any account over which neither the investment adviser nor any representative of the investment adviser has any direct or indirect influence or control; and

13. (b) (b) Transactions in securities which are direct obligations of the United States;

    1. (M) A copy of each written statement and each amendment or revision given or sent to any client or prospective client of the investment adviser in accordance with the provisions of the brochure requirement found in 23 CAR § 300-303(g), and a record of the dates that each written statement, and each amendment or revision, was given, or offered to be given, to any client or prospective client who subsequently becomes a client;

       1. (N) For each client that was obtained by the adviser by means of a referral from a third party to whom a cash fee was paid by the adviser, the following is required:

          1. (i) Evidence of a written agreement, to which the adviser is a party, related to the payment of the fee;
          2. (ii) A signed and dated acknowledgement of receipt from the client evidencing the client’s receipt of the investment adviser’s disclosure statement; and
          3. (iii) A copy of a written disclosure statement from the referring party;

       2. (O) All accounts, books, internal working papers, and any other records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return of all management accounts or securities recommendations in any notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication, including, but not limited to:

          1. (i) Electronic media that the investment adviser circulates or distributes, directly or indirectly, to two (2) or more persons (other than persons connected with the investment adviser), provided, however, that with respect to the performance of management accounts;
          2. (ii) The retention of all account statements, if they reflect all debits, credits, and other transactions in a client’s account for the period of the statement; and
          3. (iii) All worksheets necessary to demonstrate the calculation of the performance or rate of return of all managed accounts shall be deemed to satisfy the requirements of this subdivision (b)(2)(O);
       3. (P) A file containing a copy of all written communications received or sent regarding any litigation involving the investment adviser, any investment adviser representative, or employee, and regarding any written customer or client complaint;
       4. (Q) Written information about each investment advisory client that is the basis for making any recommendation or providing any investment advice to the client;
       5. (R) Written procedures to supervise the activities of employees and investment adviser representatives that are reasonably designed to achieve compliance with applicable securities laws and regulations;

       6. (S) A file containing a copy of each document (other than any notices of general dissemination) that was filed with or received from any state or federal agency that pertains to the registrant or its investment adviser representatives, which file should contain, but is not limited to, all:

          1. (i) Applications;
          2. (ii) Amendments;
          3. (iii) Renewal filings; and
          4. (iv) Registration-related correspondence;

       7. (T) Where the adviser inadvertently held or obtained a client’s securities or funds and returned them to the client within three (3) business days of receiving them, or has forwarded checks drawn by a client and made payable to a third party within three (3) business days of receiving them, the adviser will be considered as not having custody, but shall keep for all securities or funds inadvertently held, a ledger containing the following information:

          1. (i) Issuer;
          2. (ii) Type of security and series;
          3. (iii) Date of issue;
          4. (iv) For debt instruments, the:
14. (a) (a) Denomination;

15. (b) (b) Interest rate; and

    1. (c) (c) Maturity date;

       1. (v) Certificate number, including alphabetical prefix or suffix;

          1. (vi) Name in which registered;
          2. (vii) Date given to the adviser;
          3. (viii) Date sent to client or sender;
          4. (ix) Form of delivery to client or sender, or copy of the form of delivery to client or sender;
          5. (x) Mail confirmation number, if applicable, or confirmation by client or sender of the fund’s or security’s return; and
          6. (xi) Date each check was received and forwarded;

       2. (U) If an investment adviser obtains possession of securities that are acquired from the issuer in a transaction or chain of transactions not involving any public offering that complies with the exception from custody under 23 CAR § 300-309(b)(2)(B), the adviser shall keep the following records:

          1. (i) A record showing the issuer or current transfer agent’s name, address, phone number, and other applicable contract information pertaining to the party responsible for recording client interests in the securities; and
          2. (ii) A copy of any legend, shareholder agreement, or other agreement showing that those securities that are transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer;
       3. (V) For an investment adviser that has custody of a client’s funds or securities, all records and evidence of compliance required by 23 CAR § 300-309(b);

       4. (W) If an investment adviser has custody, unless it has custody solely as a consequence of its authority to make withdrawals from client accounts to pay its advisory fee and complies with the terms described under 23 CAR § 300-309(b)(2)(C)(i) – (iii), the records required to be made and kept shall include the following:

          1. (i) A copy of any and all documents executed by the client, including a limited power of attorney, under which the adviser is authorized or permitted to withdraw a client’s funds or securities maintained with a custodian upon the adviser’s instruction to the custodian;
          2. (ii) A journal or other record showing all purchases, sales receipts, and deliveries of securities (including certificate numbers) for the accounts and all other debits and credits to the accounts;
          3. (iii) A separate ledger account for each client showing:
16. (a) (a) All purchases, sales, receipts, and deliveries of securities;

17. (b) (b) The date and price of each purchase and sale; and

    1. (c) (c) All debits and credits;

       1. (iv) Copies of confirmations of all transactions effected by or for the account of any client;

          1. (v) A record for each security in which any client has a position, which record shall show the:
18. (a) (a) Name of each client having any interest in each security;

19. (b) (b) Amount of interest of each client; and

    1. (c) (c) Location of each security;

       1. (vi)
20. (a) (a) A copy of each of the client’s quarterly account statements, as generated and delivered by the qualified custodian.

21. (b) (b) If the adviser also generates a statement that is delivered to the client, the adviser shall also maintain copies of the statements along with the date the statements were sent to the clients;

    1. (vii) If applicable to the adviser’s situation, a copy of the special examination report verifying the completion of the examination by an independent certified public accountant and describing the nature and extent of the examination;

       1. (viii) A record of any finding by the independent certified public accountant of any material discrepancies found during the examination; and

          1. (ix) If applicable, evidence of the client’s designation of an independent representative;

       2. (X) If an investment adviser has custody because it advises a pooled investment vehicle, the adviser shall also keep the following records:

          1. (i) True, accurate, and current account statements; and
          2. (ii) Where the adviser complies with 23 CAR § 300-309(b)(2)(D), the records required to be made and kept shall include the following:
22. (a) (a) The date or dates of the audit;

23. (b) (b) A copy of the audited financial statements; and

    1. (c) (c) Evidence of the mailing of the audited financial statements to all limited partners, members, or other beneficial owners within one hundred twenty (120) days of the end of its fiscal year;

       1. (Y) All payroll records, corporate charters, certificates of incorporation, partnership articles, minute books, and other records routinely kept in the course of operating a business;

       2. (Z) Physical security and cybersecurity policies and procedures and privacy policy:

          1. (i) The investment adviser must maintain a current copy of these policies and procedures pursuant to 23 CAR § 300-303(i) either in hard copy in a separate location or stored on electronic storage media that is separate from and not dependent upon access to the investment adviser’s computers or a network;
          2. (ii) All records documenting the investment adviser's compliance with 23 CAR § 300-303(i) including, but not limited to, evidence of the annual review of the policies and procedures; and
          3. (iii) A record of any violation of 23 CAR § 300-303(i) and of any action taken as a result of the violation;

       3. (AA)

          1. (i) Proxy voting policies and procedures.
          2. (ii) If an investment adviser has authority to vote client securities, the written proxy voting policies and procedures required by 23 CAR § 300-303(j);

       4. (BB)

          1. (i) Code of ethics.

          2. (ii) The written code of ethics and holdings reports required by 23 CAR § 300-303(k); and

             1. (CC)
          3. (i) Material nonpublic information.
          4. (ii) Written policies and procedures to prevent misuse of material nonpublic information required by 23 CAR § 300-303(l).
    2. (3) Length of time records kept. Unless specifically provided otherwise, all books and records shall be maintained and preserved in an easily accessible place for a period of not less than five (5) years from the end of the fiscal year during which the last entry was made on the record.

    3. (4) Form of records and safety.

       1. (A) Records required to be maintained and preserved may be maintained and preserved for the required time and immediately produced or reproduced by the investment adviser by:

          1. (i) Paper or hard copy form, as those records are kept in their original form;
          2. (ii) Electronic storage media, including any digital storage medium or system that meets and complies with the other requirements of this section; or
          3. (iii) Other similar medium that meets and complies with the other requirements of this section.

       2. (B) Records must be easily accessible and retrievable in a form that is:

          1. (i) Legible;
          2. (ii) True; and

          3. (iii) Complete.

             1. (C) Records created or maintained on electronic storage media:
          4. (i) Must be maintained and preserved in a manner to reasonably safeguard them from:
24. (a) (a) Loss;

25. (b) (b) Alteration; or

    1. (c) (c) Destruction; and

       1. (ii) Must be only accessible to properly authorized personnel and the commissioner or representatives of the commissioner.
    2. (5) Segregated accounts. Registered investment advisers shall at all times keep their customers’ securities and funds in trust and segregated from their own securities and funds.

    3. (6) Supervised or managed accounts. Every registered investment adviser who renders any investment supervisory or management service to any client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, make and keep true, accurate, and current, the following:

       1. (A) Records showing separately for each client the:

          1. (i) Securities purchased and sold; and
          2. (ii) Date, amount, and price of each purchase and sale; and
       2. (B) For each security in which any client has a current position, information from which the investment adviser can promptly furnish the name of each client and the current amount or interest of the client.
    4. (7) Commingling of accounts prohibited. When a registered investment adviser is engaged in more than one (1) enterprise or activity, it shall maintain separate books of accounts and records relating to its securities business and the assets shall not be commingled with those of other businesses, and there shall be a clearly defined division with respect to income and expenses.

    5. (8) Complaint file.

       1. (A) Every registered investment adviser shall keep and maintain for a period of five (5) years a complaint file or compliance file which shall contain all complaints made against the firm or its representatives by individuals, financial institutions, and other investors.

       2. (B) The complaint file should disclose any legal action in process, settled, or threatened against the investment adviser or its representatives.

          1. (C) If the original documents are not maintained in the complaint file, the copy of the document should show the disposition of the original document.

             1. (D) If the home office of the investment adviser is not in Arkansas, then the branch office located in Arkansas shall maintain this complaint file for any complaints involving Arkansas representatives or customers.
    6. (9) Record system. In accordance with Arkansas Code § 23-42-205(d)(2) of the Arkansas Securities Act, any books or records required by this section may be maintained by the investment adviser in a manner that the identity of any client to whom such investment adviser renders investment supervisory services is indicated by numerical or alphabetical code or some similar designation.
    7. (10) An investment adviser subject to subdivision (b)(1) of this section, before ceasing to conduct or discontinuing business as an investment adviser shall arrange for and be responsible for the preservation of the books and records required to be maintained and preserved under this section for the remainder of the period specified in this section, and shall notify the commissioner in writing of the exact address where the books and records will be maintained during the period.

Codification Notes: The Securities Exchange Act of 1934 is codified at 15 U.S.C. § 78a et seq.