1. Advisory Affiliate:
Your advisory affiliates are
- all of your officers, partners, or directors (or any person performing similar functions);
- all persons directly or indirectly controlling or controlled by you; and
- all of your current employees (other than employees performing only clerical, administrative, support or similar functions).
If you are a “separately identifiable department or division” (SID) of a bank, your advisory affiliates are:
- all of your bank’s employees who perform your investment advisory activities (other than clerical or administrative employees);
- all persons designated by your bank’s board of directors as responsible for the day-to-day conduct of your investment advisory activities (including supervising the employees who perform investment advisory activities);
- all persons who directly or indirectly control your bank, and all persons whom you control in connection with your investment advisory activities; and
- all other persons who directly manage any of your investment advisory activities (including directing, supervising or performing your advisory activities), all persons who directly or indirectly control those management functions, and all persons whom you control in connection with those management functions.
2. Annual Updating Amendment:
Within 90 days after your firm’s fiscal year end, your firm must file an “annual updating amendment,” which is an amendment to your firm’s Form ADV that reaffirms the eligibility information contained in Item 2 of Part 1A and updates the responses to any other item for which the information is no longer accurate.
3. Brochure:
A written disclosure statement that you must provide to clients and prospective clients.
4. Brochure Supplement:
A written disclosure statement containing information about certain
of your supervised persons that your firm is required by Part 2B of Form ADV to provide to clients and prospective clients.
5. Charged:
Being accused of a crime in a formal complaint, information, or indictment (or equivalent formal charge).
6. Client:
Any of your firm’s investment advisory clients. This term includes clients from which your firm receives no compensation, such as family members of your supervised persons. If your firm also provides other services (e.g., accounting services), this term does not include clients that are not investment advisory clients.
7. Control:
The power, directly or indirectly, to direct the management or policies of a person, whether through ownership of securities, by contract, or otherwise.
- Each of your firm’s officers, partners, or directors exercising executive responsibility (or persons having similar status or functions) is presumed to control your firm.
- A person is presumed to control a corporation if the person: (i) directly or indirectly has the right to vote 25 percent or more of a class of the corporation’s voting securities; or (ii) has the power to sell or direct the sale of 25 percent or more of a class of the corporation’s voting securities.
- A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the partnership.
- A person is presumed to control a limited liability company (“LLC”) if the person: (i) directly or indirectly has the right to vote 25 percent or more of a class of the interests of the LLC; (ii) has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the LLC; or (iii) is an elected manager of the LLC.
- A person is presumed to control a trust if the person is a trustee or managing agent of the trust.
8. Custody:
Holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. You have custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients. Custody includes:
- Possession of client funds or securities (but not of checks drawn by clients and made payable to third parties) unless you receive them inadvertently and you return them to the sender promptly, but in any case within three business days of receiving them;
- Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and
- Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities
9. Discretionary Authority or Discretionary Basis:
Your firm has discretionary authority or manages assets on a discretionary basis if it has the authority to decide which securities to purchase and sell for the client. Your firm also has discretionary authority if it has the authority to decide which investment advisers to retain on behalf of the client.
10. Employee:
This term includes an independent contractor who performs advisory functions on your behalf.
11. Enjoined:
This term includes being subject to a mandatory injunction, prohibitory injunction, preliminary injunction, or a temporary restraining order.
12. Exempt Reporting Adviser:
An investment adviser that qualifies for the exemption from
registration under section 203(l) of the Advisers Act because it is an adviser solely to one or more venture capital funds, or under rule 203(m)-1 of the Advisers Act because it is an adviser solely to private funds and has assets under management in the United States of less than $150 million.
13. Felony:
For jurisdictions that do not differentiate between a felony and a misdemeanor, a felony is an offense punishable by a sentence of at least one year imprisonment and/or a fine of at least $1,000. The term also includes a general court martial.
14. FINRA CRD or CRD:
The Web Central Registration Depository (“CRD”) system operated by FINRA for the registration of broker-dealers and broker-dealer representatives.
15. Foreign Financial Regulatory Authority:
This term includes (1) a foreign securities authority; (2) another governmental body or foreign equivalent of a self-regulatory organization empowered by a foreign government to administer or enforce its laws relating to the regulation of investment-related activities; and (3) a foreign membership organization, a function of which is to regulate the participation of its members in the activities listed above.
16. Found:
This term includes adverse final actions, including consent decrees in which the respondent has neither admitted nor denied the findings, but does not include agreements, deficiency letters, examination reports, memoranda of understanding, letters of caution, admonishments, and similar informal resolutions of matters.
17. Government Entity:
Any state or political subdivision of a state, including :
(i) any agency, authority, or instrumentality of the state or political subdivision;
(ii) a plan or pool of assets controlled by the state or political subdivision or any agency, authority, or instrumentality thereof; and
(iii) any officer, agent, or employee of the state or political subdivision or any agency, authority, or instrumentality thereof, acting in their official capacity.
18. High Net Worth Individual:
An individual who is a “qualified client” under rule 205-3 of the Advisers Act or who is a “qualified purchaser” as defined in section 2(a)(51)(A) of the Investment Company Act of 1940.
19. Home State:
If your firm is registered with a state securities authority, your firm’s “home state” is the state where it maintains its principal office and place of business.
20. Impersonal Investment Advice:
Investment advisory services that do not purport to meet the objectives or needs of specific individuals or accounts.
21. Independent Public Accountant:
A public accountant that meets the standards of independence
described in rule 2-01(b) and (c) of Regulation S-X (17 CFR 210.2-01(b) and (c)).
22. Investment Adviser Representative:
Any of your firm’s supervised persons (except those that provide only impersonal investment advice) is an investment adviser representative, if
- the supervised person regularly solicits, meets with, or otherwise communicates with your firm’s clients,
- the supervised person has more than five clients who are natural persons and not high net worth individuals, and
- more than ten percent of the supervised person’s clients are natural persons and not high net worth individuals.
NOTE: If your firm is registered with the state securities authorities and not the SEC, your firm may be subject to a different state definition of “investment adviser representative.” Investment adviser representatives of SEC-registered advisers may be required to register in each state in which they have a place of business.
23. Investment-Related:
Activities that pertain to securities, commodities, banking, insurance, or real estate (including, but not limited to, acting as or being associated with an investment adviser, broker-dealer, municipal securities dealer, government securities broker or dealer, issuer, investment company, futures sponsor, bank, or savings association).
24. Involved:
Engaging in any act or omission, aiding, abetting, counseling, commanding, inducing, conspiring with or failing reasonably to supervise another in doing an act.
25. Legal Entity Identifier:
A “legal entity identifier” assigned by or on behalf of an internationally recognized standards setting body and required for reporting purposes by the U.S. Department of the Treasury’s Office of Financial Research or a financial regulator.
26. Management Persons:
Anyone with the power to exercise, directly or indirectly, a controlling influence over your firm’s management or policies, or to determine the general investment advice given to the clients of your firm.
Generally, all of the following are management persons:
- Your firm’s principal executive officers, such as your chief executive officer, chief financial officer, chief operations officer, chief legal officer, and chief compliance officer; your directors, general partners, or trustees; and other individuals with similar status or performing similar functions;
- The members of your firm’s investment committee or group that determines general investment advice to be given to clients; and
- If your firm does not have an investment committee or group, the individuals who determine general investment advice provided to clients (if there are more than five people, you may limit your firm’s response to their supervisors).
27. Managing Agent:
A managing agent of an investment adviser is any person, including a trustee, who directs or manages (or who participates in directing or managing) the affairs of any unincorporated organization or association that is not a partnership.
28. Minor Rule Violation:
A violation of a self-regulatory organization rule that has been designated as “minor” pursuant to a plan approved by the SEC. A rule violation may be designated as “minor” under a plan if the sanction imposed consists of a fine of $2,500 or less, and if the sanctioned person does not contest the fine. (Check with the appropriate self regulatory organization to determine if a particular rule violation has been designated as “minor” for these purposes.)
29. Misdemeanor:
For jurisdictions that do not differentiate between a felony and a misdemeanor, a misdemeanor is an offense punishable by a sentence of less than one year imprisonment and/or a fine of less than $1,000. The term also includes a special court martial.
30. Non-Resident:
(a) an individual who resides in any place not subject to the jurisdiction of the United States;
(b) a corporation incorporated in or that has its principal office and place of business in any place not subject to the jurisdiction of the United States; and
(c) a partnership or other unincorporated organization or association that is formed in or has its principal office and place of business in any place not subject to the jurisdiction of the United States.
31. Notice Filing:
SEC-registered advisers may have to provide state securities authorities with copies of documents that are filed with the SEC. These filings are referred to as “notice filings.”
32. Order:
A written directive issued pursuant to statutory authority and procedures, including an order of denial, exemption, suspension, or revocation. Unless included in an order, this term does not include special stipulations, undertakings, or agreements relating to payments, limitations on activity or other restrictions.
33. Performance-Based Fee:
An investment advisory fee based on a share of capital gains on, or capital appreciation of, client assets. A fee that is based upon a percentage of assets that you manage is not a performance-based fee.
34. Person:
A natural person (an individual) or a company. A company includes any partnership, corporation, trust, limited liability company (“LLC”), limited liability partnership (“LLP”), sole proprietorship, or other organization
35. Principal Office and Place of Business: Your firm’s executive office from which your firm’s officers, partners, or managers direct, control, and coordinate the activities of your firm.
36. Private Fund:
An issuer that would be an investment company as defined in section 3 of the Investment Company Act of 1940 but for section 3(c)(1) or 3(c)(7) of that Act.
37. Proceeding:
This term includes a formal administrative or civil action initiated by a governmental agency, self-regulatory organization or foreign financial regulatory authority; a felony criminal indictment or information (or equivalent formal charge); or a misdemeanor criminal information (or equivalent formal charge). This term does not include other civil litigation, investigations, or arrests or similar charges effected in the absence of a formal criminal indictment or information (or equivalent formal charge).
38. Related Person:
Any advisory affiliate and any person that is under common control with your firm.
39. Self-Regulatory Organization or SRO:
Any national securities or commodities exchange, registered securities association, or registered clearing agency. For example, the Chicago Board of Trade (“CBOT”), FINRA and New York Stock Exchange (“NYSE”) are self regulatory organizations.
40. Sponsor:
A sponsor of a wrap fee program sponsors, organizes, or administers the program or selects, or provides advice to clients regarding the selection of, other investment advisers in the program.
41. State Securities Authority:
The securities commissioner or commission (or any agency, office or officer performing like functions) of any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or any other possession of the United States.
42. Supervised Person:
Any of your officers, partners, directors (or other persons occupying a similar status or performing similar functions), or employees, or any other person who provides investment advice on your behalf and is subject to your supervision or control.
43. United States person:
This term has the same meaning as in rule 203(m)-1 under the Advisers Act, which includes any natural person that is resident in the United States
44. Wrap Brochure or Wrap Fee Program Brochure:
The written disclosure statement that sponsors of wrap fee programs must provide to each of their wrap fee program clients.
45. Wrap Fee Program:
Any advisory program under which a specified fee or fees not based directly upon transactions in a client’s account is charged for investment advisory services. (which may include portfolio management or advice concerning the selection of other investment advisers) and the execution of client transactions