Section 5.02. Net worth requirement.

 

(1)  Each investment adviser registered or required to be registered under ch. 551 , Stats. , whose principal office is in this state and who accepts prepayment of fees exceeding $1,200 per client that are collected six or more months in advance, shall maintain at all times a positive net worth. The division may require that a current appraisal be submitted in order to establish the worth of any asset.

(2)  Except as follows, each investment adviser registered or required to be registered under ch. 551 , Stats. , whose principal office is in this state who has custody of client funds or securities shall maintain at all times a minimum net worth of $35,000:

(a) Investment advisers having custody solely as a result of a direct fee deduction, as described in s. DFI-Sec 5.035 (4) (a) 2. , who comply with all of the conditions in s. DFI-Sec 5.035 (1) (f) , and who make and maintain the records required in s. DFI-Sec 5.035 (3) (b) , shall not be required to comply with the net worth requirement in this subsection.

(b) Investment advisers having custody solely as a result of advising pooled investment vehicles, as defined in s. DFI-Sec 5.035 (4) (a) 3. , who comply with all of the conditions in s. DFI-Sec 5.035 (1) (g) or (2) (c) and who create and maintain the records required in s. DFI-Sec 5.035 (3) (c) , shall not be required to comply with the net worth requirement in this subsection.

(3)  If an investment adviser is an individual, the person shall segregate from personal capital an amount sufficient to satisfy the net capital requirement, and the amount so segregated shall be utilized solely for the business for which the investment adviser is registered.

(4)  The requirements of subs. (1) and (2) shall not apply to any investment adviser that has its principal office in a state other than this state, provided that the investment adviser is registered in that state and is in compliance with that state's minimum net capital requirements, if any.

(5)  For purposes of this section, the term "net worth" means an excess of assets over liabilities, as determined by generally accepted accounting principles, but shall not include as assets any of the following:

(a) Prepaid expenses, deferred charges, goodwill, franchise rights, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense, and all other assets of an intangible nature.

(b) Home, home furnishings, automobiles and any other personal items not readily marketable, if the investment adviser is an individual.

(c) Advances or loans to stockholders and officers, if the investment adviser is a corporation.

(d) Advances or loans to partners or members, if the investment adviser is a partnership or limited liability company.

(6)  The division may by order exempt any investment adviser whose principal office is in this state from the provisions of this section, either unconditionally or upon specified conditions, if by reason of the special nature of its business or the particular facts and circumstances of the application, the division determines that compliance with the provisions is not necessary in the public interest or for the protection of investors.

Cr. Register, December, 1977, No. 264 , eff. 1-1-78; cr. (3), Register, December, 1992, No. 444 , eff. 1-1-93; am. (1), Register, December, 1995, No. 480 , eff. 1-1-96; am. (1), renum. (2) and (3) to be (3) and (6) and am. (6), cr. (2), (4) and (5), Register, December, 1998, No. 516 , eff. 1-1-99; r. and recr. (1) and (2), Register, December, 1999, No. 528 , eff. 1-1-00; CR 04-074 : am. (2) Register December 2004 No. 588 , eff. 1-1-05; CR 08-077 : am. (1), (2) (intro.), (3), (4), (5) (intro.) and (d) Register December 2008 No. 636 , eff. 1-1-09.