21 Va. Admin. Code § 5-20-260

Current through Register Vol. 41, No. 6, November 4, 2024

Section 21VAC5-20-260 - Supervision of agents

A. A broker-dealer shall be responsible for the acts, practices, and conduct of its agents in connection with the sale of securities until such time as the agents have been properly terminated as provided by 21VAC5-20-130.

B. Every broker-dealer shall exercise diligent supervision over the securities activities of all of its agents.

C. Every agent employed by a broker-dealer shall be subject to the supervision of a principal designated by such broker-dealer. All principals designated by the broker-dealer shall exercise reasonable supervision over the securities activities of all of the agents under their responsibility.

D. As part of its responsibility under this section, every broker-dealer shall establish, maintain and enforce written procedures, a copy of which shall be kept in each business office, which shall (i) set forth the procedures adopted by the broker-dealer to comply with the Act and regulations, including but not limited to the following duties imposed by this section, and (ii) state at which business office or offices the broker-dealer keeps and maintains the records required by 21VAC5-20-240:

1. The review and written approval by the designated supervisor of the opening of each new customer account;

2. The frequent examination of all customer accounts to detect and prevent irregularities or abuses;

3. The prompt review and written approval by a designated supervisor of all securities transactions by agents and all correspondence pertaining to the solicitation or execution of all securities transactions by agents;

4. The review and written approval by the designated supervisor of the delegation by any customer of discretionary authority with respect to the customer's account to the broker-dealer or to a stated agent or agents of the broker-dealer and the prompt written approval of each discretionary order entered on behalf of that account; and

5. The prompt review and written approval of the handling of all customer complaints.

E. Every broker-dealer who has designated more than one principal pursuant to subsection C of this section shall designate a principal or group of principals, independent from those that conduct direct agent supervision who shall supervise and periodically review the activities of the principals designated pursuant to subsection C of this section.

All principals designated pursuant to subsections C and E shall exercise reasonable supervision over those individuals under their responsibility to ensure compliance with these subsections.

F. Every broker-dealer shall no less often than annually conduct a physical inspection of each business office of the broker-dealer to ensure (i) the agent or agents at the respective business office are in compliance with the statutory provisions of the Act or regulations promulgated by the commission and (ii) the written procedures and compliance requirements of the broker-dealer are enforced.

For purposes of this section, the term "principal" means, but is not limited to, an individual engaged directly in (i) the management, direction, or supervision on a regular or continuous basis on behalf of such broker-dealer of the following activities: sales, training, research, investment advice, underwriting, private placements, advertising, public relations, trading, maintenance of books or records, financial operations; or (ii) the training of persons associated with such broker-dealer for the management, direction, or supervision on a regular or continuous basis of any such activities.

21 Va. Admin. Code § 5-20-260

Derived from Rule 303, Case No. SEC810005, eff. July 1, 1981; amended, Virginia Register Volume 13, Issue 25, eff. September 1, 1997; Errata, 13:26 VA.R. 3710 September 15, 1997; amended, Virginia Register Volume 19, Issue 23, eff. July 1, 2003; Volume 26, Issue 22, eff. July 1, 2010; Volume 29, Issue 20, eff. June 3, 2013.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.