Post-Registration Requirements

Question 1

What is in the firm’s written supervisory procedures (WSP)

Answer 1

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
.
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

Question 2

Potential red flags of an RR

Answer 2

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).

Question 3

What is an office of supervisory jurisdiction (OSJ)

Answer 3

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

Question 4

How often should internal audits of OSJ be conducted.

Answer 4

Annually

Question 5

What is a branch office?

Answer 5

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.

Question 6

How often should a branch office be audited.

Answer 6

At least once every 3 years

Question 7

What happens if a firm does not abide the rules for more than 30 days?

Answer 7

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.

Question 8

what is a customer complaint

Answer 8

a customer complaint as a complaint that is received in writing

Question 9

What should an agent or IAR do when they receive a written complaint?

Answer 9

Must be escalated to manager/ principal immediately

Question 10

How long should the records of a complaint be held?

Answer 10

4 years

Question 11

What should be done if a complaint is rescinded?

Answer 11

Original complaint must be held and a copy returned to the cm

Question 12

Where should statements or correspondence be sent to?

Answer 12

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.

Question 13

For BD records how long are most records retained?

Answer 13

Most records, including customer correspondence and trade confirmations, dmust be retained for at least 3 years.

Question 14

How long are BD Trade blotters, containing all purchases and sales of securities, and customer account records held?

Answer 14

Trade blotters, containing all purchases and sales of securities, and customer account records must be retained for at least 6 years

Question 15

How long are complaints held for BD and how many years in an easily accessible location?

Answer 15

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.

Question 16

How long are Partnership agreements and articles of incorporation, Minutes of board meetings, Stock certificates books, and Amendments held for BDs and IAs?

Answer 16

Life of the firm, plus 3 years

Question 17

What information is on an BD order ticket? and how long are they held in recordkeeping?

Answer 17

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

Question 18

How long are IAs records held?

Answer 18

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.

Question 19

What are the records that an IA must keep?

Answer 19

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

Question 20

What is a order memoranda?

Answer 20

IA order tickets

Question 21

What does an IA order memoranda contain?

Answer 21

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**

Question 22

What rules do IAs follow for recordkeeping who have branches in multiple states

Answer 22

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.

Question 23

Can the Admin require information to be furnished to clients?

Answer 23

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.

Question 24

When can an admin audit or examine records?

Answer 24

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.

Question 25

Can the admin examine records located within and out of state?

Answer 25

Yes The Administrator may examine the books and records of broker-dealers and registered investment advisers located within or out of state.

Question 26

can an electronic recordkeeping system be used for recordkeeping?

Answer 26

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.

Question 27

What should be done if a document filed with the admin is incomplete or inaccurate in any material respect?

Answer 27

The Administrator must be notified

Question 28

When should an amendment be filed

Answer 28

promptly

Question 29

How long would the amendment cause the registration to be delayed for?

Answer 29

30 days

Question 30

What financial reports must be filed with the admin

Answer 30

Balance sheets
Income statements
Net capital reports
Any other report the Administrator may reasonably require

Question 31

Can the admin require that all advertising, marketing, and sales material provided to clients be filed?

Answer 31

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.