Supervision
Firms must reasonably supervise their agents and IARs.
What is Supervision?
Broker-dealers must supervise their agents, and investment advisers their IARs, through written procedures appropriate to the business. Failure to reasonably supervise is itself a ground for disciplining the firm, separate from the underlying misconduct.
Supervision: a worked example
A firm that ignores obvious red flags in an IAR's trading can be sanctioned for failure to supervise.
More terms in Uniform Securities Act & Registration
Uniform Securities Act (USA)
The model state securities law most states' 'blue sky' statutes are based on.
State Securities Administrator
The official or agency that enforces a state's securities act.
Person (USA Definition)
Anyone who can be held legally responsible - individuals and organizations.
Investment Adviser (USA Definition)
Advises on securities, as a business, for compensation.
Excluded from the Investment Adviser Definition
Banks, incidental professionals, broker-dealers, and publishers are not advisers at all.
Exemptions from State Adviser Registration
An adviser with no office in the state and only institutional or very few clients there.
De Minimis Exemption
No place of business in the state and fewer than 6 clients there in 12 months.
Federal Covered Adviser
An adviser registered with the SEC rather than the states.
All Uniform Securities Act & Registration terms · Full glossary