The Division conducts periodic examinations of broker-dealer and state-registered investment advisor offices to enforce the Virginia Securities Act as part of its commitment to insuring the safety of Virginia investors. § 13.1-518. The examination also serves to identify compliance issues that may be corrected before a problem arises. A typical audit will sample nearly every aspect of the broker-dealer’s or investment advisor’s activities, with focus on the recommendation and sales practices occurring at the specific location. Examinations are conducted on location with subsequent review of records in the Division’s office as needed.
Generally, most of the examinations are performed on a routine basis, but may be conducted on a “for cause” basis in the event of a suspected statutory/regulation violation. Examinations may be announced or unannounced, and under certain circumstances, may occur outside of the Commonwealth jointly with other state securities commissions.
- Interview with Person in Charge
The examiner will meet with the person in charge of the office location. The person in charge should allow at least one hour for the examiner to review most of the business operations and provide/explain a records request list that forms the basis of the audit.
- Major Areas Covered During the Examination
Schedule showing areas included in audits
|Broker-Dealer Examinations||Investment Advisor Examinations|
|Books and Record Maintenance||Books and Record Maintenance|
|Registration Compliance||Registration Compliance|
|Sales Practices||Performance Claims|
|Suitability of Customer Investments||Custody of Client Funds |
|Disciplinary Problems/Complaints||Supervision Practices|
| ||$Fee Assessments|
Examiners will thoroughly review broker-dealer or investment advisor records on-site. Examiners may make copies of records for subsequent review and may discuss records or other activities with office personnel regarding matters the Division has the authority to investigate. At the conclusion of the examination, the examiner(s) usually will conduct an exit interview prior to leaving the premises.
Many examinations result in routine deficiencies being noted by staff. In these situations, we will request that the firms and applicable agents become compliant in a reasonably short time by sending a deficiency letter. In cases of significant or repeat violations and in situations involving material failures to comply and/or cooperate, formal Commission action, in lieu of a deficiency letter, may result. The Commission may impose penalties for violations of the Securities Act, a Commission Order, or regulation. (1) § 13.1-519, (2) § 13.1-520, and (3) § 13.1-521.
An audited firm can usually expect written results from us within two to six weeks if deficiencies were noted as a result of the audit. If no deficiencies were noted, or the matter has concluded, a closing letter will be sent to the respective firm’s compliance office and the business office that was inspected.