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Who is subject to an examination by the Securities Division?
Any broker-dealer or investment adviser that is registered or required to be registered under the Act is subject to an examination. See §409.4-411(d) of the Missouri Securities Act of 2003.
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Will the Division call in advance to schedule the examination?
No. An examination may be made at any time and without prior notice. See §409.4-411(d) of the Missouri Securities Act of 2003.
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- What is the purpose of the examination?
Examinations are completed in the public interest to assure compliance with the books and records requirements of the Missouri Securities Laws and for the protection of investors.
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Does an examination indicate that we are in trouble?
Not necessarily. The Division may conduct either a "routine" or "for-cause" examination and the purpose of the visit may not be disclosed. Regardless of the type of examination, examiners will review the same records. Receiving a follow-up letter citing deficiencies identified during the examination is not a reportable incident requiring notification on the Central Registration Depository (CRD) or the Investment Advisers Registration Depository (IARD).
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What records will the examiners ask to see?
Examiners will review documents relating to securities sales including, but not limited to: sales ledgers; receipt and disbursement blotters; bank records; advertising; complaints; correspondence; sales literature; supervisory procedures; and client files. Investment advisers are required to maintain such additional records as: disclosure documents; corporate or partnership records; client contracts and solicitor agreements.
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What if the records are kept in an "electronic" format?
Records required to be maintained under the act may be maintained in any form of data storage acceptable under 17(a) of the Securities Exchange Act of 1934 if these records are readily accessible to the commissioner. See §409.4-411(c)(2) of the Missouri Securities Act of 2003.
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What happens if access to the records is denied?
Refusal to cooperate with regulators in the securities industry can have dramatic consequences. The commissioner may revoke, suspend, censure, or bar the registration of a person who refuses to allow or otherwise impedes the commissioner from conducting an examination. In addition, the commissioner may impose a civil penalty on a registrant in an amount not to exceed $5,000 for a single violation or $50,000 for several violations. See §409.4-412(b), (c), and (d) of the Missouri Securities Act of 2003.
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What will happen when the examination is completed?
Any concerns or deficiencies identified by the examiners will be summarized in a letter to the firm. The firm will then have the opportunity to provide a written response to the Division indicating what steps have been taken to resolve the deficiencies. Failure to respond in a timely manner may result in further action being taken against the firm.
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What are the most common deficiencies found during broker-dealer and investment adviser examinations?
Some common problems often exist regarding failure to update material information within 30 days, failure to maintain compliant financial statements, improper advertising, unapproved or inappropriate correspondence, failure to follow industry compliance policies and procedures, inattention to investor complaints, incomplete documentation in client files, lack of agent supervision, etc. Serious violations and/or criminal activity may result in disciplinary action against the firm and may be referred for prosecution.
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Will I have to pay for the examination?
The commissioner may assess a reasonable charge for conducting an examination. See §409.4-411(d) of the Missouri Securities Act of 2003.
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