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Virginia Administrative Code (Last Updated: January 10, 2017) |
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Title 21. Securities and Retail Franchising |
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Agency 5. State Corporation Commission, Division of Securities and Retail Franchising |
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Chapter 80. Investment Advisors |
Section 170. Supervision of investment advisor representatives
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A. An investment advisor shall be responsible for the acts, practices, and conduct of its investment advisor representatives in connection with advisory services until such time as the investment advisor representatives have been properly terminated as provided by 21VAC5-80-110.
B. Every investment advisor shall exercise diligent supervision over the advisory activities of all of its investment advisor representatives.
C. Every investment advisor representative employed by an investment advisor shall be subject to the supervision of a supervisor designated by such investment advisor. The supervisor may be the investment advisor in the case of a sole proprietor, or a partner, officer, office manager or any qualified investment advisor representative in the case of entities other than sole proprietorships. All designated supervisors shall exercise reasonable supervision over the advisory activities of all investment advisor representatives under their responsibility.
D. As part of its responsibility under this section, every investment advisor, except entities employing no more than one investment advisor representative, shall establish, maintain and enforce written procedures, a copy of which shall be kept in each business office, which shall set forth the procedures adopted by the investment advisor to comply with the Act and associated regulations, which shall include but not be limited to the following duties imposed by this section; provided that an investment advisor having its principal place of business outside this Commonwealth and registered or licensed, and in compliance with the applicable books and records requirements, in the state where its principal place of business is located, shall only be required to make, keep current, maintain and preserve such of the following required books, ledgers and records as are not in addition to those required under the laws of the state in which it maintains its principal place of business:
1. The review and written approval by the designated supervisor of the opening of each new client account;
2. The frequent examination of all client accounts to detect and prevent irregularities or abuses;
3. The prompt review and written approval by a designated supervisor of all advisory transactions by investment advisor representatives and of all correspondence pertaining to the solicitation or execution of all advisory transactions by investment advisor representatives;
4. The prompt review and written approval of the handling of all client complaints.
E. Every investment advisor who has designated more than one supervisor pursuant to subsection C of this section shall designate from among its partners, officers, or other qualified investment advisor representatives, a person or group of persons, independent from the designated business supervisor or supervisors who shall supervise and periodically review the activities of the supervisors designated pursuant to subsection C of this section. All supervisors designated pursuant to this subsection E shall exercise reasonable supervision over the supervisors under their responsibility to ensure compliance with this subsection.
F. Every investment advisor who has more than one business office where its investment advisor representatives offer investment advisory related services shall no less often than annually, conduct an independent physical inspection of each business office under his supervision to ensure (i) investment advisor representatives at the respective business office are in compliance with the statutory provisions of the Act or associated regulations promulgated by the commission and (ii) the written procedures and compliance requirements are being enforced.
Historical Notes
Derived from Rule 1203, Case No. SEC870040, eff. July 2, 1987; amended, Volume 13, Issue 25, eff. September 1, 1997; Volume 14, Issue 22, eff. July 1, 1998; Volume 26, Issue 22, eff. July 1, 2010; Volume 29, Issue 20, eff. June 3, 2013; Errata, 29:24 VA.R. 3429 July 29, 2013.