(1) (a) The securities commissioner may
by rule require licensed broker-dealers who are not registered under the federal
Securities Exchange Act of 1934:
(I) To satisfy specified minimum financial responsibility requirements;
(II) To file with the securities commissioner specified financial and other
information;
(III) To make and maintain specified records and to preserve such records for
five years or such other period as may be specified;
(IV) 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
(V) To acquire and keep in force a fidelity bond in such minimum amount and
covering such 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:
(I) To file with the securities commissioner specified financial and other
information;
(II) To make and maintain specified records and to preserve such records for
five years or such other period as may be specified; and
(III) 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.
(2) The securities commissioner may by rule require licensed broker-dealers
who are registered 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.
(3) (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.
(4) 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.
(5) No investment adviser with its principal office and place of business in
this state or investment 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:
(a) All of the securities of each client are segregated, marked to identify the
particular client with any beneficial interest therein, and held in safekeeping in
some place reasonably free from risk of loss, damage, or destruction; and
(b) (I) All of the funds of each client are deposited in one or more accounts,
containing only clients' funds, at a depository institution; and
(II) Each account is maintained in the name of the investment adviser or a
federal covered adviser as agent or trustee for such clients; and
(III) A separate record is maintained for each such account that shows the
name and address 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
(c) Written notification is sent to the client giving the place and manner in
which the client'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
(d) An itemized statement is sent to each client, at least once every three
months, that shows 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
(e) A certified public accountant or, with the prior written consent of the
client, a public accountant 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.
(f) 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).