1. (A) Authority and Purpose
2. (1) The Division enacts this rule under authority granted by Sections 61-1-5 and 61-1-24.

3. (2) This rule specifies the annual financial reports required of a broker-dealer and an investment adviser.

   1. (B) Definitions

4. (1) "Division" means the Division of Securities, Utah Department of Commerce.

   1. (C) Broker-Dealer required financial statements

5. (1) Upon request, each broker-dealer must file with the Division audited financial statements as of the end of its fiscal year. The statements must meet the requirements of Paragraph (E).

   1. (D) Investment Adviser required financial statements
6. (1) Except as provided in subparagraph (D)(2), each investment adviser who has custody or possession of client funds or securities or requires payment of advisory fees six months or more in advance and in excess of $1,200 per client shall file with the Division audited financial statements as of the end of the investment adviser's fiscal year. The statements must meet the requirements of Paragraph (E).

7. (2) Every investment adviser that has its principal place of business in a state other than this state shall be exempt from the requirements of subparagraph (D), provided the investment adviser is licensed or registered in such state, is in compliance with such state's financial reporting requirements, and annually files with the Division a copy of any financial reports filed with such state.

   1. (E) Financial statement requirements

      The financial statements filed pursuant to this rule must:

8. (1) include a balance sheet, a statement of income or operations, a statement of shareholder equity, and a statement of cash flows, accompanied by appropriate notes stating the accounting principles and practices followed in their preparation, the basis at which securities are included and other notes as may be necessary for an understanding of the statements.
9. (2) be prepared in accordance with generally accepted accounting principles.

10. (3) be audited by an independent certified public accountant. The audit must:

    1. (a) be made in accordance with generally accepted auditing standards;
    2. (b) include a review of the accounting system, the internal accounting controls and procedures for the safeguarding of securities and funds including appropriate tests thereof since the prior examination.

11. (4) be accompanied by an unqualified opinion of the auditor as to the report of financial condition. In addition, the auditor shall submit as a supplementary opinion any comments, based upon the audit, as to any material inadequacies found to

    exist in the accounting system, the internal accounting controls and procedures for safeguarding securities and funds, and shall indicate any corrective action taken or proposed.

12. (5) The financial statements shall be filed with the Division within 120 days following the end of the investment adviser's fiscal year.

KEY: securities, securities regulation, recordkeeping, financial requirements

Date of Last Change: November 22, 2010

Notice of Continuation: June 27, 2022

Authorizing, and Implemented or Interpreted Law: 61-1-5; 61-1-24