Post-Registration Requirements Flashcards
What is in the firm’s written supervisory procedures (WSP)
Review, by a registered principal, of all transactions. There is an exception to this rule, however: if the firm uses a “risk-based review system,” enabling the firm to focus on the areas that pose the greatest risks of violation, they are not required to conduct detailed reviews of every individual transaction
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Review and approve of new accounts
Review of incoming and outgoing written correspondence and internal communications by a registered principal
Safeguard customer funds and securities, including procedures for review of transmittal of funds and securities into and out of customer accounts
Monitor the outside activities of registered representatives
Handle customers written complaints
Maintain required books and records
Potential red flags of an RR
may indicate unethical or fraudulent activity include excessive trading (churning), making blanket recommendations (including selling only one share class of mutual funds to all customers), repeated customer complaints of the same or similar nature, and improper suitability determination for the sole purpose of generating revenue (selling only products that generate the highest revenue).
What is an office of supervisory jurisdiction (OSJ)
an office of a broker-dealer where any of the following activities occur:
Order execution
Approval of new accounts
Approval of retail communications
Review of customer orders
How often should internal audits of OSJ be conducted.
Annually
What is a branch office?
A branch office is any location where one or more agents of a broker-dealer engage in the business of effecting or attempting to effect securities transactions.
How often should a branch office be audited.
At least once every 3 years
What happens if a firm does not abide the rules for more than 30 days?
According to the USA, if a firm does not abide by these stipulations for more than 30 days, the broker-dealer’s registration in the state will be either revoked or suspended until the firm is in compliance with the rule.
what is a customer complaint
a customer complaint as a complaint that is received in writing
What should an agent or IAR do when they receive a written complaint?
Must be escalated to manager/ principal immediately
How long should the records of a complaint be held?
4 years
What should be done if a complaint is rescinded?
Original complaint must be held and a copy returned to the cm
Where should statements or correspondence be sent to?
The Account holder’s mailing address as provided by the CM. It cannot be kept in a branch, held, or sent to a different address designated by the agent. This is intended to keep the customer informed of any account activity and to help prevent fraud.
For BD records how long are most records retained?
Most records, including customer correspondence and trade confirmations, dmust be retained for at least 3 years.
How long are BD Trade blotters, containing all purchases and sales of securities, and customer account records held?
Trade blotters, containing all purchases and sales of securities, and customer account records must be retained for at least 6 years
How long are complaints held for BD and how many years in an easily accessible location?
Records of written customer complaints must be kept for 4 years These records must be kept in an easily accessible location for the first 2 years.
How long are Partnership agreements and articles of incorporation, Minutes of board meetings, Stock certificates books, and Amendments held for BDs and IAs?
Life of the firm, plus 3 years
What information is on an BD order ticket? and how long are they held in recordkeeping?
Buy or sell
Account number
Type of account
Ticker symbol for the security
Number of shares
Type of order
Solicited or unsolicited
Discretionary or not discretionary
A customer’s name is not recorded on the order ticket.
Held for 3 years
How long are IAs records held?
An investment adviser’s records must be readily accessible for a total of 5 years and kept in the adviser’s principal office for the first 2 years.
What are the records that an IA must keep?
Financial statements and trial balances
Lists of discretionary accounts and powers-of-attorney for those accounts
Income and expense records, including a journal cash receipts and disbursement records
Checkbooks, bank statements, cancelled checks, and cash reconciliations
Separate records and confirmations for each client for which the adviser has custody of funds and securities
Records for each customer’s account
Specific records for each customer’s account showing whether the orders were discretionary, who executed the order (broker-dealer or bank), who recommended and who placed the purchase or sale
A copy in writing of each agreement entered into by the investment adviser with any client
Originals of all written correspondence sent to and received from clients
Copies of documents and working papers used in determining rate of return and performance of managed accounts
Copies of all newspaper/magazine articles, brochures, advertising or sales literature
What is a order memoranda?
IA order tickets
What does an IA order memoranda contain?
Buy or sell
Account designation (name or account number)
Date of order entry*
Ticker symbol for the security
Size of order
Type of order, price if a limit order, and life of order
Name of person connected with the IA making the recommendation
Name of person placing the order**
Name of executing broker-dealer**
Discretionary or nondiscretionary**
What rules do IAs follow for recordkeeping who have branches in multiple states
Investment advisers who have branches or other locations in several states only need to comply with the recordkeeping requirements applicable to the state in which they have their principal office.
Can the Admin require information to be furnished to clients?
Yes The Administrator may require that information be furnished or disseminated to clients or prospective clients in the state as necessary or appropriate for the protection of investors and advisory clients and in the best interest of the public.
When can an admin audit or examine records?
The Administrator may audit or examine these records at any time if it is in the public’s best interest or for the protection of investors.
Can the admin examine records located within and out of state?
Yes The Administrator may examine the books and records of broker-dealers and registered investment advisers located within or out of state.
can an electronic recordkeeping system be used for recordkeeping?
An electronic recordkeeping system of this information is acceptable as long as records are readily accessible for the Administrator to view or download. Acceptable storage media includes original hard copies, microfilm, microfiche, and optical disc. As an alternative, firms may maintain a time-stamped audit trail system. A separate duplicate copy needs to be maintained in an alternate location or a backup electronic recordkeeping system must be in place.
What should be done if a document filed with the admin is incomplete or inaccurate in any material respect?
The Administrator must be notified
When should an amendment be filed
promptly
How long would the amendment cause the registration to be delayed for?
30 days
What financial reports must be filed with the admin
Balance sheets
Income statements
Net capital reports
Any other report the Administrator may reasonably require
Can the admin require that all advertising, marketing, and sales material provided to clients be filed?
Yes The Administrator may require that all advertising, marketing, and sales materials provided to clients (except for exempt transactions) be filed with the Administrator. Sales materials include form letters, brochures, pamphlets, and prospectuses.
