Investment Adviser Guide
All investment advisers are required to create and maintain certain records relating to their advisory accounts. If the adviser has its principal place of business in a state other than Wisconsin, the adviser must keep only those records prescribed by its home state.
An investment adviser whose principal office is located in Wisconsin is required to make and keep all account documents, correspondence, memoranda, papers, books and other records which the division prescribes by rule ( § 551.411(3)(a), Wis. Stats.). Following is a list of the books and records that you are required to keep as specified in § DFI-Sec 5.03(1) and (2), Wis. Adm. Code:
All partnership agreements, or all articles of incorporation, by-laws, minute books and stock certificate books (§ DFI-Sec 5.03(1)(a), Wis. Adm. Code).
A general ledger (or other records in the case of a sole proprietor) reflecting all asset, liability, income, expense, and capital accounts (§ DFI-Sec 5.03(1)(b), Wis. Adm. Code).
A record showing all payments received, including date of receipt, purpose, and from whom received; and all disbursements, including date paid, purpose, and to whom made (§ DFI-Sec 5.03(1)(c), Wis. Adm. Code).
A record showing all receivable and payables (§ DFI-Sec 5.03(1)(d), Wis. Adm. Code).
All trials balances, financial statements, and internal audit working papers which may be prepared relating to your business (§ DFI-Sec 5.03(1)(e), Wis. Adm. Code).
A memorandum of each order given for the purchase or sale of any security, or any instruction received from your clients concerning the purchase, sale, receipt or delivery of a particular security, and of any modification or cancellation. The memo must identify the advisory person who recommended the transaction to the client or who made the investment decision using discretion granted by the client, the person who placed the order if different from the decision maker, the name of the account, the date of entry, and the broker-dealer who executed it. Orders entered using discretionary power must be identified as such. This record may be in the form of order tickets or a trade blotter and must be kept in chronological order for all transactions conducted by all advisory employees (§ DFI-Sec 5.03(1)(f), Wis. Adm. Code).
Copies of all written communications, correspondence, confirmations, appraisals and other records relating to your investment adviser activities (§ DFI-Sec 5.03(1)(g), Wis. Adm. Code). This includes copies of all financial plans created for clients, whether implemented by the adviser or not.
If you provide account supervision or management services, you must provide at least annually to each Wisconsin client a written summary of their account which includes information setting forth the name, quantity and market value of each security under management, and the total value of cash and securities under management (§ DFI-Sec 5.05(6), Wis. Adm. Code).
Copies of all client complaints relating to investment activities and your firm's response (including supporting documentation). In this paragraph, "complaint" means any written or oral statement of a client or any person acting on behalf of a client alleging a grievance involving the activities of persons under the control of the investment adviser in connection with providing investment advice or placing orders on behalf of clients (§ DFI-Sec 5.03(1)(h), Wis. Adm. Code). In addition, you must file a copy of any civil or criminal complaint or arbitration related to your advisory business with the Division. This includes complaints against the investment adviser or any of its partners, officers or representatives. A complaint in this context means any civil or criminal proceeding, or any administrative or disciplinary proceeding by any public or private regulatory agency. Filing with the Division must be made within 20 days of the date the complaint is served on your firm, together with a copy of your answer or reply to the complaint, within 10 days of the date the answer or reply is issued and a copy of any decision, order or sanction made with respect to any such proceeding within 20 days of the decision date ( § DFI-Sec 5.04(2), Wis. Adm. Code ).
A list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of any client (§ DFI-Sec 5.03(1)(i), Wis. Adm. Code).
A copy of all powers of attorney and other evidence of the granting of any discretionary authority by any client to the investment adviser or to a third party (§ DFI-Sec 5.03(1)(j), Wis. Adm. Code).
A copy of all written agreements entered into by the investment adviser with any client, or with any other person if the agreement relates to the business of the investment adviser (§ DFI-Sec 5.03(1)(k), Wis. Adm. Code).
A copy of the contract must be given to the client within 20 days after the execution of the contract (§ DFI-Sec 5.05(5), Wis. Adm. Code).
A file containing any advertisement (as defined within the meaning of section 206(4)-1. of the investment adviser act of 1940) used in connection with the offering of the investment advisory services in this state (§ DFI-Sec 5.03(1)(L), Wis. Adm. Code).
Records that comply with Rule 204-2(a)(12) under section 204 of the Investment Advisers Act of 1940 containing information for all securities transactions effected for the account of the investment adviser or any of its employee's accounts subject to that rule. This includes the name and amount of the security involved, the date and nature of the transaction, the execution price, and information regarding client transactions in the same security (§ DFI-Sec 5.03(1)(n), Wis. Adm. Code).
You must provide to each of your clients a written brochure or other document meeting the requirements of rule 204-3 under the Investment Advisers Act of 1940 providing information about the investment adviser, its business and activities and its representatives. Part 2 of Form ADV is used to fulfill this requirement. You must keep written documentation on the initial delivery of the brochure and the subsequent annual delivery of or offers to deliver a copy of the brochure to each client. (§ DFI-Sec 5.03(1)(o), Wis. Adm. Code) In the case of an annual offer made by mass mailing, the documentation requirement may be satisfied by keeping a copy of the generic offering document and a copy of the mailing list used (§ DFI-Sec 5.05(8), Wis. Adm. Code).
You must keep a copy of each brochure and any supplements or amendments thereto, as required by § DFI-Sec 5.05(8), Wis. Adm. Code, a summary of material changes that are required by ADV Part 2 and a record of the dates that each brochure, supplement, amendment or revision and each summary of material changes was delivered to clients or prospective clients. (§ DFI-Sec 5.03(1)(p), Wis. Adm. Code)
You must keep a copy of the signed Form U4 for each investment adviser representative that is registered for your firm including any Disciplinary Reporting Pages and amendments. (§ DFI-Sec 5.03(1)(q), Wis. Adm. Code)
If you render investment supervisory or management service to any client, you must, 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, maintain and keep current:
Records for each client showing the securities purchased or sold on the advice of the adviser, and the date, amount, and price of each purchase and sale ( § DFI-Sec 5.03(2)(a), Wis. Adm. Code ).
A security cross-index record reflecting, for each security, the name and account number of the client and the current amount or interest owned by each client (§ DFI-Sec 5.03(2)(b), Wis. Adm. Code).
A record of information gathered from the client and used to determine the suitability of recommendations for that client. The information must include the client's net worth, annual income and other financial information, investment objectives and experience and any other information which would bear on the determination of suitability. This information should be updated whenever you receive information from the client that results in a material change that would affect the adviser's ability to make suitable recommendations for the client. (§ DFI-Sec 5.03(2)(c), Wis. Adm. Code)
Each investment adviser must establish written supervisory procedures and a system for applying the procedures, which may reasonably be expected to prevent and detect any violations of Ch. 551, Wis. Stats., and rules and orders thereunder. A recitation of Statutes and rules or a laundry list of "thou shalt nots" does not satisfy the requirement. Procedures which are designed to help the supervisor prevent and detect violations of the law must not only be outlined but also implemented on a regular and on-going basis and specify at least by title, the identity of the person responsible for implementing the procedure (§ DFI-Sec 5.05(1), Wis. Adm. Code). Advisers may designate more than one person responsible for specific portions of the supervisory procedures.
A current copy of the investment adviser's Form ADV reflecting all amendments must be maintained. Any notice of change of control or change of name, as well as any material change in the information included in the investment adviser's most recent Form ADV must be filed with the Division via IARD within 30 days of the date of the change (§ DFI-Sec 5.04(3), Wis. Adm. Code).
Records such as order tickets, confirmations and powers of attorney are not required in situations where the investment adviser does not place orders for its clients.
The required books and records must be preserved for a period of not less than 5 years, the first 2 years in an easily accessible place. After an account has closed, you must retain the records required under (I), (j) and (k) for a period of not less than 5 years after the closing of the account. Records required in (a) must be preserved for a period of not less than 3 years after withdrawal or expiration of your registration in this state. The record may be retained by computer if a printed copy of the record can be prepared immediately upon request. In the event a record has been preserved for 2 years, a microfilm or electronic copy may be substituted for the remainder of the required period as long as copies can be produced immediately upon request (§ DFI-Sec 5.03(3), Wis. Adm. Code). "Immediately upon request" means, for records maintained within the last two years, produced on the same day as requested by on-site examiners. For records maintained beyond the last two years, records must be produced within 24 hours of the request, unless otherwise indicated by Division staff.
Every branch office of an investment adviser must prepare and keep current the records listed in (c), (f), (g), (h), (k), L), and (3) ( (a), (b) and (c) . These records must be preserved at the branch office for a period of not less than 3 years, the first 2 years in an easily accessible place. Upon closing of the branch office, the records shall be transferred to the home office for the duration of the required retention period. Branch records that are duplicated in full by home office records are not required to be kept after closing of a branch. The record may be retained by computer or other electronic means if a printed copy of the record can be prepared immediately upon request. If a record has been preserved for the first year of the 3 year period, a microfilm or electronic copy may be substituted for the remainder of the required retention period (§ DFI-Sec 5.03(4) and (5), Wis. Adm. Code).
See the "Branch Office" section of this guide for a complete definition of "branch office."