N.M. Code R. § 12.11.5.23

Current through Register Vol. 35, No. 11, June 11, 2024

Section 12.11.5.23 - MINIMUM FINANCIAL REQUIREMENTS FOR INVESTMENT ADVISERS

A. All investment advisers. An investment adviser registered or required to be registered under the New Mexico Uniform Securities Act that shall maintain at all times a minimum net worth of $5,000 or such amount as may be required by any other applicable subsection of this rule, whichever requirement is higher.

B. Investment advisers with custody. An investment adviser registered or required to be registered under the Act that has custody of client funds or securities shall maintain at all times a minimum net worth of $2,000,000, or post a surety bond in the amount set by order of the director up to a maximum of $2,000,000.

C. Investment advisers with discretionary authority. An investment adviser registered or required to be registered under the New Mexico Uniform Securities Act that has discretionary authority over client funds or securities but does not have custody of client funds or securities shall maintain at all times a minimum net worth of $10,000, unless the director by order approves a lesser minimum net worth.

D. Net worth less than minimum requirement. Unless otherwise exempted, as a condition of the right to transact business in this state, every investment adviser registered or required to be registered under the New Mexico Uniform Securities Act shall by the close of business on the next business day notify the director if that investment adviser's net worth is less than the minimum required. After transmitting such notice, each investment adviser shall file by the close of business on the next business day a report with the director of its financial condition, including the following:

(1) a trial balance of all ledger accounts;

(2) a statement of all client funds or securities which are not segregated;

(3) a computation of the aggregate amount of client ledger debit balances; and

(4) a statement as to the number of client accounts.

E. Section definition of net worth. For purposes of 12.11.5.23 NMAC, the term "net worth" shall mean an excess of assets over liabilities, as determined by generally accepted accounting principles.

(1) Net worth shall not include the following assets:

(a) prepaid expenses, except as to items properly classified as assets under generally accepted accounting principles;

(b) deferred charges;

(c) goodwill;

(d) franchise rights;

(e) organizational expenses;

(f) patents;

(g) copyrights;

(h) marketing rights;

(i) debt discount and expense; and

(j) all other assets of intangible nature.

(2) In addition, for individuals, net worth shall not include home, home furnishings, automobile(s) and any other personal items not readily marketable.

(3) In addition, for corporations and limited liability companies, net worth shall not include advances or loans to stockholders, officers or members.

(4) In addition, for partnerships, net worth shall not include advances or loans to partners.

F. Appraisal. The director may require that a current appraisal be submitted in order to establish the worth of any asset.

G. Minimum capital requirement for investment advisers with principal place of business out of state. Every registered investment adviser that has its principal place of business in a state other than New Mexico shall maintain only such minimum capital as required by such state, provided the investment adviser is licensed or registered in such state and is in compliance with such state's minimum capital requirement.

N.M. Code R. § 12.11.5.23

12.11.5.23 NMAC - Rp, 12.11.5.17 NMAC and 12.11.5.18 NMAC, 1-1-2010