W. Va. Code R. § 111-1-12

Current through Register Vol. XLI, No. 44, November 1, 2024

Section 111-1-12 - Post registration provisions

Each of the rules in this section (12 through 12.2) is a legislative rule, and each is adopted pursuant to the provisions of section four hundred twelve, article four, chapter thirty-two of the Code and sections two hundred one, two hundred two, two hundred three and two hundred four, article two, chapter thirty-two of the the Code, and each rule relates to sections two hundred one, two hundred two, two hundred three and two hundred four, article two, chapter thirty-two of the Code.

12.1. Record keeping requirements.

(a)

(1) A broker-dealer shall comply with SEC Rules 15c1-4 (confirmation of transactions, 17 CFR 240.15c1 - 4), 17a-3 (records to be made by certain exchange members, brokers and dealers, 17 CFR 240.17a-3) and 17a-4 (records to be preserved by certain exchange members, brokers and dealers, 17 CFR 240.17a-4) .

(2) A broker-dealer shall immediately telegraph or otherwise expeditiously notify in writing the Commissioner of the theft or mysterious disappearance of any securities or funds from any of its offices, setting forth all material facts known to him concerning the theft or disappearance.

(3) An issuer-agent (other than one employed by or associated with an issuer registered pursuant to the Investment Company Act of 1940) registered pursuant to the Code shall make, keep and preserve for a period not less than three (3) years, books and records containing the following information:

(A) Copies of all writing confirming the sale or purchase of securities;

(B) The date and amount of each cash receipt or disbursement associated with such sale or purchase of securities;

(C) The number of shares involved, their certificate numbers and the date they were delivered to or received from the investor.

(4) An issuer-agent (other than one employed by or associated with an issuer registered under the Investment Company Act of 1940) shall notify a customer in writing at or before completion of each purchase or sale of a security, and a debit or a credit for securities, case and other items in the account of others. The notice shall state:

(A) The identity and price of the security,

(B) the account for which entered,

(C) the date of execution,

(D) the name of the agent handling the transaction, and

(E) the fact that the transaction was unsolicited, if so.

(5) An issuer-agent employed by or associated with an issuer registered under the Investment Company Act of 1940 shall comply with SEC Rules 270.31a-1 (Records to be maintained by registered investment companies, 17 CFR 270.31a-1) ,270.31a-2 (Records to be preserved by registered investment companies, 17 CFR 270.3a-2) and 270.31a-3 (Records prepared or maintained by others, 17 CFR 270.31a-3) . The issuer's compliance with the rules shall be deemed compliance by such issuer-agent.

(6) The person responsible for the day-to-day operation of an office of a broker-dealer in this state must be either the broker-dealer himself (in case of proprietorship), an officer of the broker-dealer or a registered agent of the broker-dealer.

(7) Complaint file. -- Every broker-dealer shall maintain a file which shall contain all investor complaints and legal actions against the firm by West Virginia residents, or against the firm's agents registered in West Virginia. It shall also include any legal or administrative action against the firm or any of its agents taken by a state or federal agency or self-regulatory organization. The file shall be maintained in the West Virginia branch office where the complaint applies, as well as the home office of the broker-dealer.

(8) Market maker records. -- Any broker-dealer which makes a market in a security shall maintain and preserve for a period of at least five (5) years, the following:

(A) Proof in its files that it is lawful for the broker-dealer to, in fact, make a market in such securities, i.e., the securities are either registered or exempt from registration under chapter thirty-two of the Code, and applicable federal law.

(B) Information which he reasonably believes is true and correct and reasonably current, and which was obtained by him from sources which he reasonably believes are reliable. This information shall be available upon request to any person expressing an interest in a proposed transaction in the security with the broker-dealer. The information shall include:

(1) The exact name of the issuer and its predecessor (if any);

(2) The address of the issuer's principal executive offices;

(3) The state of incorporation, if it is a corporation;

(4) The exact title and class of the security;

(5) The par or stated value of the security;

(6) The number of shares or total amount of the securities outstanding as of the end of the issuer's fiscal year;

(7) The name and address of the transfer agent;

(8) The nature of products or services offered;

(9) The nature and extent of the issuer's facilities;

(10) The name of the chief executive officer and members of the Board of Directors;

(11) The issuer's most recent balance sheet, profit and loss and the retained earnings statement;

(12) Similar financial information for such part of the two (2) preceding fiscal years as the issuer or its predecessor has been in existence; and

(13) Whether the broker-dealer or any associates persons are affiliated, directly or indirectly, with the issuer.

(C) The term "market maker" shall mean a broker-dealer who, with respect to the particular type of security:

(1) Regularly publishes bona fide competitive bid and offer quotations in a recognized interdealer quotation system or regularly furnishes bona fide competitive bid and offer quotations to other broker-dealers on request; and

(2) is ready, willing and able to effect transactions in reasonable quantities at his quoted price with other broker-dealers on a regular basis.

(b) Financial reporting requirements.

(1) Each broker-dealer shall file annually with the Commissioner a copy of his annual financial statements filed with the SEC as required under and at times specified in SEC Rule 17a-5, FOCUS Report Part II (Reports to be made by certain broker and dealers, 17 CFR 240.17a-5) and shall file with the Commissioner a copy of each report required by said Rule 17a-5(d) on the date and in the form prescribed therein. Broker-dealers required to furnish their customers with an audited financial statement in accordance with said Rule 17a-5 may satisfy the requirement of this subsection by filing with the Commissioner a copy of that audited financial statement. If, in the annual audit report, the independent certified public accountant commented on any material inadequacies in accordance with SEC Rules 17a-5 and 17a-11, a copy of the comments shall accompany the financial statement filed with the Commissioner.

(2) A broker-dealer shall file with the Commissioner notice of any proposed transfer of control of such broker-dealer within thirty (30) days prior to the date on which such transfer of control is to become effective or such shorter period as the Commissioner shall permit, and shall furnish the Commissioner such additional information as the Commissioner may require. A transfer of control is deemed a material amendment of the application for registration of such broker-dealer for purposes of section two hundred three, chapter thirty-two of the Code.

(c) Duty to amend information previously filed.

(1) If the information contained in any application or amendment for registration as a broker-dealer, agent or issuer-agent changes in a material way, is or becomes incomplete in any respect, an amendment shall be promptly filed at the time of knowledge of such changes. Events requiring notice to the Commissioner shall include, but are not limited to, the following:

(A) Change in firm name, ownership, management or control of a broker-dealer;

(B) Change in any of a broker-dealer's partners, officers or persons occupying a similar status or performing similar functions;

(C) Change in the business address;

(D) Change in supervisory personnel for an office;

(E) Insolvency, dissolution, liquidation or a material, adverse change or improvement of working capital;

(F) Noncompliance with the minimum net capital requirement set forth in Section 11.1(d) of these rules;

(G) Termination of business or discontiuance of activities as broker-dealer or agent;

(H) The filing of a criminal charge or civil action against a person or entity, including a partner or officer, registered with the Commissioner, in which an alleged violation of a securities law is involved;

(I) The result of any hearing, proceeding or action in (H), as well as any subsequent action taken on appeal by a reviewing agency or court;

(J) The commencement or notice of intent to commence any action by an administrative agency, regulatory agency, self-regulatory organization or court to consider whether to deny, suspend or revoke a registration, to impose a fine, injunction or other penalty upon the registrant, and the results of such action, including subsequent measures taken by any agency or court;

(K) The filing of a civil action against a person or entity registered with the Commissioner alleging a course of action other than a securities violation which, if proven, would affect the financial capacity of the registrant.

The registrant will have complied with the requirement of prompt notification pursuant to this section if notification has been filed directly with the Commissioner, or as noted in the next sentence, in writing, as soon as possible, but in no event more than fifteen (15) business days after the registrant has knowledge of the circumstances requiring such notification. A broker-dealer who is a NASD member shall comply with the requirements of this section, where appropriate, by filing its Revised SEC Form BD, as adopted by the SEC effective January 1, 1984, with the NASD's CRD System, when such a broker-dealer is informed by the Commissioner that the Commissioner is participating in the NASD's CRD System with respect to broker-dealers. This change in filing requirements, when effective, does not change the reporting requirements of this section in any other manner.

(L) The Commissioner regards updating of the agent application to be within the supervisory responsibilities of a broker-dealer, as well as the responsibility of the agent, so that the requirements of the filing(s) set forth in Section 12.1(c)(1) of these rules will be met in some manner in every case. A broker-dealer shall have established procedures to insure compliance with this section.

12.2. Denial, revocation, suspension, cancellation and withdrawal of registration.

(a) (Reserved)

(b) Broker-dealer, agent, issuer-agent and investment adviser termination.

(1) A broker-dealer, which seeks to withdraw or fails to renew its registration pursuant to subsection (e), section two hundred four, article two, chapter thirty-two of the Code shall file Revised SEC Form BDW, as adopted by the SEC effective January 1, 1984, in accordance with the instructions contained therein. A broker-dealer which is a NASD member shall file the Revised SEC Form BDW with the NASD's CRD system when such a broker-dealer is informed by the Commissioner that the Commissioner is participating in the NASD's CRD System with respect to broker-dealers. A broker-dealer or issuer which seeks to terminate or fails to renew the registration of an agent or issuer agent shall file Form U-5 in accordance with the instructions contained therein. NASD-member broker-dealers shall file said form with the NASD's CRD. All other broker-dealers shall file said form directly with the Commissioner. All such forms shall be filed with the Commissioner, or as noted above for NASD member firms, within ten (10) days of the termination. An investment adviser that seeks to withdraw or terminate its registration shall inform the Commissioner in writing, of its intention to do so, in the manner or in the form(s) prescribed by the Commissioner, at least fifteen (15) days prior to the date on which the termination/withdrawal is desired to become effective.

(2) (Reserved)

(3) (Reserved)

(4) The registration of any agent is not effective during any period when the broker-dealer which the agent represents is not registered or when the securities of the issuer which the agent represents is not registered or when the securities of the issuer which the agent represents are not subject to an effective order of registration or exemption, or upon termination of the offering. The Commissioner may take steps to revoke the registration of such an agent if the circumstances which cause said registration to become not effective are not, or cannot reasonably be, in the Commissioner's judgment, promptly corrected.

W. Va. Code R. § 111-1-12