Florida Regulations 69W-600.0161: Net Capital and Financial Reporting Requirements for Investment Advisers
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(1) Net capital requirements for investment advisers. The net capital of an investment adviser applicant or registrant under Florida Statutes § 517.12, shall be maintained at a level required by this rule.
(a) An investment adviser registered or required to be registered with the Office of Financial Regulation (Office) who has custody of client funds or securities shall maintain minimum net capital of $25,000 except:
1. An investment adviser having custody solely due to direct fee deduction shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
2. An investment adviser having custody solely due to advising pooled investment vehicles and complying with the terms described under Fl. Admin. Code R. 69W-600.0132(3)(d), shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
3. An investment adviser having custody solely because the investment adviser, associated person of the investment adviser, or employee, director, or owner of the investment adviser is the trustee for a trust, and where the investment adviser acts as the investment adviser to that trust and complies with the terms described under Fl. Admin. Code R. 69W-600.0132(3)(e), shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
4. An investment adviser having custody solely because the investment adviser, associated person of the investment adviser, or employee, director or owner of the investment adviser is the trustee for a beneficial trust and complies with the terms described under Fl. Admin. Code R. 69W-600.0132(3)(f), shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
(b) An investment adviser registered or required to be registered with the Office who does not have custody of client funds or securities, or who is described in subparagraphs (1)(a)1. through 4., above, shall maintain minimum net capital of $2,500.
(c) For purposes of this rule, the term “”net capital,”” shall mean assets minus liabilities, as determined by United States generally accepted accounting principles. The Office may require a current appraisal be submitted in order to establish the worth of any asset.
(2) Financial reporting requirements for investment advisers. Documents required to be filed with the Office under this subsection shall be filed via the Office’s online portal at: https://www.flofr.gov/sitePages/WelcomeToOnlineServices.htm.
(a) Every registered investment adviser who requires payment of advisory fees six months or more in advance and in excess of $500 per client, or who has custody of client funds or securities except those who have custody solely due to direct fee deduction or who meet the requirements of paragraph 69W-600.0132(3)(d), (3)(e) or (3)(f), F.A.C., shall annually file with the Office audited financial statements as of the end of the investment adviser’s fiscal year within 90 days following the end of the fiscal year. Audited financial statements filed pursuant to this rule must be:
1. Examined in accordance with generally accepted auditing standards and prepared in conformity with United States generally accepted accounting principles;
2. Audited by a certified public accountant that meets the standards of independence described in Rule 2-01(b) and (c) of Regulation S-X (17 C.F.R. § 210.2-01(b) and (c)), which is incorporated by reference in Fl. Admin. Code R. 69W-200.002; and,
3. Accompanied by an opinion of the accountant with respect to the financial statements, and by a note stating the principles used to prepare it, the basis of included securities, and any other explanations required for clarity.
(b) Every registered investment adviser who does not have custody of client funds or securities, or those who have custody solely due to direct fee deduction or who meet the requirements of paragraph 69W-600.0132(3)(d), (3)(e), or (3)(f), F.A.C., shall annually file with the Office unaudited financial statements as of the end of the investment adviser’s fiscal year within 90 days following the end of the fiscal year. Unaudited financial statements filed pursuant to this rule must be prepared in accordance with United States generally accepted accounting principles and must include:
1. A Statement of Financial Condition or Balance Sheet,
2. A Statement of Income,
3. An oath or affirmation that such statement or report is true and correct to the best knowledge, information, and belief of the person making such oath or affirmation. Such oath or affirmation shall be made before a person authorized to administer such oath or affirmation, and shall be made by a duly authorized representative of the entity for whom the financial statements were prepared; and,
4. The Office may also specifically request an investment adviser pursuant to Florida Statutes § 517.201, to include a Statement of Changes in Financial Position, Statement of Changes in Stockholder’s/Partner’s/Proprietor’s Equity, and a Statement of Changes in Liabilities Subordinated to Claims of General Creditors.
(c) This rule shall not apply to an investment adviser also registered as a dealer with the Office if the dealer registrant is a current member of a securities association registered pursuant to section 15A of the Securities Exchange Act of 1934 (15 U.S.C. § 78o-3), which is incorporated by reference in Fl. Admin. Code R. 69W-200.002, and such association requires financial reports to be filed with it.
(d) Registration as an investment adviser may be denied, revoked, or suspended pursuant to Florida Statutes § 517.161(1), if financial statements reflect:
1. Net capital less than required under this rule; or
2. An audit opinion qualified as to the scope of the audit, the entity’s ability to continue on a going-concern basis, or other material qualifications; or
3. An adverse audit opinion or a disclaimer of opinion.
(3) For purposes of this rule, “”custody”” is defined in Fl. Admin. Code R. 69W-600.0132(1)(a)
Rulemaking Authority 517.03(1), 517.12(8), 517.121(2) FS. Law Implemented 517.12(8), 517.121(2), 517.161(1), 517.201 FS. History-New 5-6-15, Amended 3-3-21, 2-14-23.
Terms Used In Florida Regulations 69W-600.0161
- Appraisal: A determination of property value.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Oath: A promise to tell the truth.
- Trustee: A person or institution holding and administering property in trust.
1. An investment adviser having custody solely due to direct fee deduction shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
2. An investment adviser having custody solely due to advising pooled investment vehicles and complying with the terms described under Fl. Admin. Code R. 69W-600.0132(3)(d), shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
3. An investment adviser having custody solely because the investment adviser, associated person of the investment adviser, or employee, director, or owner of the investment adviser is the trustee for a trust, and where the investment adviser acts as the investment adviser to that trust and complies with the terms described under Fl. Admin. Code R. 69W-600.0132(3)(e), shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
4. An investment adviser having custody solely because the investment adviser, associated person of the investment adviser, or employee, director or owner of the investment adviser is the trustee for a beneficial trust and complies with the terms described under Fl. Admin. Code R. 69W-600.0132(3)(f), shall be required to comply with the net capital requirements of paragraph (1)(b) of this rule.
(b) An investment adviser registered or required to be registered with the Office who does not have custody of client funds or securities, or who is described in subparagraphs (1)(a)1. through 4., above, shall maintain minimum net capital of $2,500.
(c) For purposes of this rule, the term “”net capital,”” shall mean assets minus liabilities, as determined by United States generally accepted accounting principles. The Office may require a current appraisal be submitted in order to establish the worth of any asset.
(2) Financial reporting requirements for investment advisers. Documents required to be filed with the Office under this subsection shall be filed via the Office’s online portal at: https://www.flofr.gov/sitePages/WelcomeToOnlineServices.htm.
(a) Every registered investment adviser who requires payment of advisory fees six months or more in advance and in excess of $500 per client, or who has custody of client funds or securities except those who have custody solely due to direct fee deduction or who meet the requirements of paragraph 69W-600.0132(3)(d), (3)(e) or (3)(f), F.A.C., shall annually file with the Office audited financial statements as of the end of the investment adviser’s fiscal year within 90 days following the end of the fiscal year. Audited financial statements filed pursuant to this rule must be:
1. Examined in accordance with generally accepted auditing standards and prepared in conformity with United States generally accepted accounting principles;
2. Audited by a certified public accountant that meets the standards of independence described in Rule 2-01(b) and (c) of Regulation S-X (17 C.F.R. § 210.2-01(b) and (c)), which is incorporated by reference in Fl. Admin. Code R. 69W-200.002; and,
3. Accompanied by an opinion of the accountant with respect to the financial statements, and by a note stating the principles used to prepare it, the basis of included securities, and any other explanations required for clarity.
(b) Every registered investment adviser who does not have custody of client funds or securities, or those who have custody solely due to direct fee deduction or who meet the requirements of paragraph 69W-600.0132(3)(d), (3)(e), or (3)(f), F.A.C., shall annually file with the Office unaudited financial statements as of the end of the investment adviser’s fiscal year within 90 days following the end of the fiscal year. Unaudited financial statements filed pursuant to this rule must be prepared in accordance with United States generally accepted accounting principles and must include:
1. A Statement of Financial Condition or Balance Sheet,
2. A Statement of Income,
3. An oath or affirmation that such statement or report is true and correct to the best knowledge, information, and belief of the person making such oath or affirmation. Such oath or affirmation shall be made before a person authorized to administer such oath or affirmation, and shall be made by a duly authorized representative of the entity for whom the financial statements were prepared; and,
4. The Office may also specifically request an investment adviser pursuant to Florida Statutes § 517.201, to include a Statement of Changes in Financial Position, Statement of Changes in Stockholder’s/Partner’s/Proprietor’s Equity, and a Statement of Changes in Liabilities Subordinated to Claims of General Creditors.
(c) This rule shall not apply to an investment adviser also registered as a dealer with the Office if the dealer registrant is a current member of a securities association registered pursuant to section 15A of the Securities Exchange Act of 1934 (15 U.S.C. § 78o-3), which is incorporated by reference in Fl. Admin. Code R. 69W-200.002, and such association requires financial reports to be filed with it.
(d) Registration as an investment adviser may be denied, revoked, or suspended pursuant to Florida Statutes § 517.161(1), if financial statements reflect:
1. Net capital less than required under this rule; or
2. An audit opinion qualified as to the scope of the audit, the entity’s ability to continue on a going-concern basis, or other material qualifications; or
3. An adverse audit opinion or a disclaimer of opinion.
(3) For purposes of this rule, “”custody”” is defined in Fl. Admin. Code R. 69W-600.0132(1)(a)
Rulemaking Authority 517.03(1), 517.12(8), 517.121(2) FS. Law Implemented 517.12(8), 517.121(2), 517.161(1), 517.201 FS. History-New 5-6-15, Amended 3-3-21, 2-14-23.