The Commission staff conducts unannounced routine and for cause compliance audits of all broker-dealers operating in-state offices. In some cases audits are performed in other localities as necessary to administer the Virginia Securities Act.

Major areas covered by the audits are as follows:

• Books and recordkeeping requirements
• Registration compliance
• Sales practices
• Supervision practices
• Suitability of customer investments
• Disciplinary problems and complaints

Common problems noted include:

• Failure to make and/or keep complete or appropriate books and records
• Supervision of recordkeeping and/or sales practices
• Unsuitable investments or strategies in relationship to customer needs
• Non-registration or incomplete NASD employee testing accomplishments (insufficient for job duties)
• Selling away (the sale by broker-dealer agents of securities not through or approved by the broker-dealer)
• Misrepresenting expected returns or guaranteeing returns

Results: Many audits 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 or face stiffer actions. In cases of significant violations or repeat violations, we will likely undertake a formal Commission action vs. the mere deficiency letter for routine problems. The audited firm can usually expect written results from us within two to four weeks if any deficiencies were found.

The commission staff conducts unannounced routine and for cause compliance audits of all state covered investment advisors located in Virginia. Under certain circumstances, staff may audit jointly with other states firms outside of Virginia but otherwise regulated as state covered advisors.

Major areas covered by the audits are as follows:

• Books and recordkeeping requirements
• Registration compliance
• Performance claims
• Supervision practices
• Disclosure compliance and brochure

Results: Many audits 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 or face stiffer actions. In cases of significant violations or repeat violations, we will likely undertake a formal Commission action vs. the mere deficiency letter for routine problems. The audited firm can usually expect written results from us within two to four weeks if any deficiencies were found.