NC Register Volume 16 Issue 15 - Office of Administrative Hearings

(B)(C)TEMPORARY RULES(i.e., purchase, sale or otheracquisition or disposition); the priceat which it was effected; and thename of the dealer or bank with orthrough whom the transaction waseffected. Such record may alsocontain a statement declaring that thereporting or recording of any suchtransaction shall not be construed asan admission that the investmentadviser or advisory representative hasany direct or indirect beneficialownership in the security. Atransaction shall be recorded not laterthan ten days after the end of thecalendar quarter in which thetransaction was effected.An investment adviser is "primarilyengaged in a business or businessesother than advising registeredinvestment companies or otheradvisory clients" when, for each of itsthree most recent fiscal years or forthe period of time since organization,whichever is lesser, the investmentadviser derived, on an unconsolidatedbasis, more than 50 percent of:(i) its total sales and revenues,and(ii) its income (or loss) beforeincome taxes andextraordinary items, fromsuch other business orbusinesses.For purposes of this Subparagraph(13), the term "advisoryrepresentative", when used inconnection with a company primarilyengaged in a business or businessesother than advising registeredinvestment companies or otheradvisory clients, shall mean anypartner, officer, director or employeeof the investment adviser who makesany recommendation, whoparticipates in the determination ofwhich recommendation shall bemade, or whose functions or dutiesrelate to the determination of whichrecommendation shall be made, orwho, in connection with his duties(other than clerical, ministerial oradministrative duties), obtains anyinformation concerning whichsecurities are being recommendedprior to the effective dissemination ofsuch recommendations or of theinformation concerning suchrecommendations; and any of thefollowing persons who obtaininformation concerning securities(D)recommendations being made bysuch investment adviser prior to theeffective dissemination of suchrecommendations or of theinformation concerning suchrecommendations:(i) any person in a controlrelationship to theinvestment adviser,(ii) any affiliated person of such(iii)controlling person, andany affiliated person of suchaffiliated person."Control" shall have the samemeaning as that set forth in Section2(a)(9) of the Investment CompanyAct of 1940, as amended.An investment adviser shall not bedeemed to have violated theprovisions of this Subparagraph (13)because of his failure to recordsecurities transactions of any advisoryrepresentative if he establishes that heinstituted adequate procedures andused reasonable diligence to obtainpromptly reports of all transactionsrequired to be recorded;(14)copy of the following:(A)(B)(C)A copy of each written statement andeach amendment or revision thereof,given or sent to any client orprospective client of such investmentadviser in accordance with theprovisions of Rule .1707 of thisSection;any summary of material changes thatis required by Part 2 of Form ADVbut is not contained in the writtenstatement; anda record of the dates that each writtenstatement, and each amendment orrevision thereof, was given, or offeredto be given, to any client orprospective client who subsequentlybecomes a client;(15) A memorandum describing any legal ordisciplinary event listed in Schedule D ofForm ADV or in any Form U-4 relating to anyof the investment adviser's investment adviserrepresentatives and presumed to be material, ifthe event involved the investment adviser orany of its investment adviser representatives orsupervised persons and is not disclosed in thewritten statements described in Part (a)(14)(A)of this Rule. The memorandum must explainthe investment adviser's determination that thepresumption of materiality is overcome, andmust discuss the factors described in thoseitems;A16:15 NORTH CAROLINA REGISTER February 1, 20021730