(1) (a) The securities commissioner may by rule require licensed broker-dealers who are not registered under the federal "Securities Exchange Act of 1934":
To satisfy specified minimum financial responsibility requirements;
To file with the securities commissioner specified financial and other information;
To make and maintain specified records and to preserve such records for five yearsor such other period as may be specified;
To establish written supervisory procedures and a system for applying such procedures that is reasonably expected to prevent and detect violations of this article; and
To acquire and keep in force a fidelity bond in such minimum amount and coveringsuch risks as may be specified.
(b) The securities commissioner may by rule require licensed investment advisers whose principal office and place of business is in this state, and licensed investment advisers whose principal office and place of business is not in this state but that is either not licensed in the state where it maintains its principal office and place of business or not in compliance with such state's financial operating requirements or books and records requirements:
To file with the securities commissioner specified financial and other information;
To make and maintain specified records and to preserve such records for five yearsor such other period as may be specified; and
To establish written supervisory procedures and a system for applying such procedures that is reasonably expected to prevent and detect violations of this article.
(c) If a broker-dealer or investment adviser at any time knows, or has reason to know, that it is not in compliance with any rule made by the securities commissioner under this subsection (1), the broker-dealer or investment adviser shall promptly notify the securities commissioner of all relevant facts.
The securities commissioner may by rule require licensed broker-dealers who areregistered under the federal "Securities Exchange Act of 1934" to make, maintain, and preserve specified records, but no rule made by the securities commissioner under this subsection (2) shall require any broker-dealer to make, maintain, or preserve any records other than those required to be made, maintained, and preserved under the federal "Securities Exchange Act of 1934".
(a) Every licensed broker-dealer, licensed investment adviser, and every licensed sales representative shall file with the securities commissioner such information as may be necessary to correct any information in that person's application for license that is or has become inaccurate in any material respect. The requirements of this subsection (3) may be satisfied by a broker-dealer who is registered as a broker-dealer under the federal "Securities Exchange Act of 1934" or by a sales representative licensed to act for such a broker-dealer by filing the correcting information through the central registration depository.
(b) A federal covered adviser who has filed the notice described in section 11-51-403 shall file with the securities commissioner a copy of each amendment filed by such adviser with the securities and exchange commission at the time such amendment is filed with the securities and exchange commission.
Every licensed broker-dealer who is not registered under the federal "Securities Exchange Act of 1934" shall at all times have in its employment one or more individuals who have passed the written examination required under section 11-51-405 for individuals with supervisory responsibility. Every licensed investment adviser shall at all times have one or more individuals employed or otherwise associated with the investment adviser designated as having supervisory responsibilities over the investment adviser representatives of such adviser. Such individual or individuals shall have primary responsibility to supervise all of the licensed sales representatives of the broker-dealer, or all of the licensed investment adviser representatives of the investment adviser, as the case may be, and, for the purposes of section 11-51-410, each such individual who is not a partner, officer, or director of the broker-dealer or investment adviser shall be deemed a person occupying a similar status or performing similar functions as a partner, officer, or director. A broker-dealer or investment adviser who is not in compliance with this subsection (4) shall promptly notify the securities commissioner of all relevant facts.
No investment adviser with its principal office and place of business in this state orinvestment adviser representative of a licensed investment adviser with a place of business in this state shall take or maintain custody or possession of any funds or securities in which any client of such person has any beneficial interest unless:
All of the securities of each client are segregated, marked to identify the particularclient with any beneficial interest therein, and held in safekeeping in some place reasonably free from risk of loss, damage, or destruction; and
(I) All of the funds of each client are deposited in one or more accounts, containingonly clients' funds, at a depository institution; and
Each account is maintained in the name of the investment adviser or a federal covered adviser as agent or trustee for such clients; and
A separate record is maintained for each such account that shows the name andaddress of the depository institution where the account is maintained, the dates and amounts of deposits to and withdrawals from the account, and the exact amount of each client's beneficial interest in the account; and
Written notification is sent to the client giving the place and manner in which theclient's funds or securities will be maintained immediately after the investment adviser or investment adviser representative accepts custody or possession of such funds or securities from the client and thereafter, if and when there is any change in the place or manner, written notification is sent to the client explaining the change; and
An itemized statement is sent to each client, at least once every three months, thatshows the client's funds and securities in the custody or possession of the investment adviser or investment adviser representative at the end of the period and all debits, credits, and transactions affecting the funds and securities during the period; and
A certified public accountant or, with the prior written consent of the client, a publicaccountant verifies all funds and securities of clients at least once during each calendar year through an actual examination. Such examination shall be at a time chosen by the accountant without prior notice to the investment adviser or investment adviser representative. The investment adviser shall file with the securities commissioner promptly after each such examination a certificate from the accountant in which such accountant avers to the commissioner that the accountant has performed an examination of the funds and securities accounts, and in which the accountant describes the nature and extent of the examination, and the results and conclusions reached.
The investment adviser or investment adviser representative who has custody of client funds or securities posts bonds in amounts and with conditions the securities commissioner may by rule prescribe, subject to the limitations of section 222 (c) of the federal "Investment Advisers Act of 1940". Any equivalent deposit of cash or securities shall be accepted in lieu of any bonds so required. Every bond shall provide for suit thereon by any person who has a cause of action under section 11-51-604 (3) and (5).
Source: L. 90: Entire article R&RE, p. 724, § 1, effective July 1. L. 98: (1), (3), and (4) amended and (5) added, p. 555, § 10, effective January 1, 1999.
Editor's note: This section is similar to former § 11-51-110 as it existed prior to 1990.
Cross references: For the "Securities Exchange Act of 1934", see Pub.L. 73-291, codified at 15 U.S.C. § 78a et seq.; for the "Investment Advisers Act of 1940", see Pub.L. 76768, codified at 15 U.S.C. § 80b-1 et seq.