KRS § 292.336 — KY Code / Title XXV / Chapter 292 / Section 292.336
292.336 Recordkeeping and reporting requirements -- Examination by commissioner -- Administrative regulations -- Central depository system for documents -- Investment advisers -- Required policies and procedures
Status: in_force

292.336 Recordkeeping and reporting requirements -- Examination by

commissioner -- Administrative regulations -- Central depository system for

documents -- Investment advisers -- Required policies and procedures.

(1) (a) Every registered broker-dealer, firm employing issuer agents, and investment

adviser shall make and keep all accounts, correspondence, memoranda,

papers, books, and other records which the commissioner by rule or order

prescribes.

(b) All records required shall be:

1. Preserved for three (3) years unless the commissioner, by administrative

regulation or order, prescribes otherwise for particular types of records;

and

2. Kept within this state or shall, at the request of the commissioner, be

made available at any time for examination by him or her either in the

principal office of the registrant or by production of exact copies thereof

in this state.

(c) If a broker-dealer is registered with the United States Securities and Exchange

Commission, then the books and records required by this section are limited

to those that the Securities Exchange Act of 1934, 15 U.S.C. secs. 78a et seq.,

requires the broker-dealer to maintain.

(d) If an investment adviser has his or her principal place of business in another

state, then the requirements of this subsection shall be limited to the books

and records requirements of that state, if the adviser is registered in that state

and in compliance with its recordkeeping requirements.

(2) (a) Subject to paragraphs (b) and (c) of this subsection, every registered broker-

dealer, investment adviser, and firm employing issuer agents shall file any

reports required by the commissioner through administrative regulation or

order promulgated under this chapter.

(b) If a broker-dealer is registered with the United States Securities and Exchange

Commission, then the reports required by this subsection shall be limited to

those required under the Securities Exchange Act of 1934, 15 U.S.C. secs. 78a

et seq.

(c) If an investment adviser has his or her principal place of business in another

state, then the requirements of this subsection shall be limited to the reporting

requirements of that state, if the adviser is registered in that state and in

compliance with its reporting requirements.

(3) (a) Subject to paragraph (b) of this subsection, if the information contained in any

document filed is or becomes inaccurate or incomplete in any material

respect, then the broker-dealer, investment adviser, or firm employing issuer

agents, as applicable, shall promptly file a correcting amendment.

(b) In the case of a covered adviser, the adviser shall file only copies of those

documents required to be filed with the United States Securities and Exchange

Commission.

(4) (a) The commissioner may conduct examinations, within or outside this state, of

each broker-dealer, issuer agent, or investment adviser at such times and in

such scope as he or she determines.

(b) 1. Examinations of each broker-dealer, issuer agent, or investment adviser

may be made without prior notice to the broker-dealer, issuer agent, or

investment adviser.

2. The expense reasonably attributable to any examination shall be paid by

the broker-dealer, issuer agent, or investment adviser whose business is

examined, but the expense so payable shall not exceed an amount which

the commissioner by administrative regulation prescribes.

(c) For the purpose of avoiding unnecessary duplication of examinations, the

commissioner, insofar as he or she deems it practicable in administering this

subsection, may cooperate with securities administrators of other states, the

United States Securities and Exchange Commission, and any national

securities exchange or national securities association registered under the

Securities Exchange Act of 1934, 15 U.S.C. secs. 78a et seq.

(5) (a) Every investment adviser that is registered or required to be registered shall

establish written procedures relating to a business continuity and succession

plan.

(b) The plan shall:

1. Be based upon the facts and circumstances of the investment adviser's

business model, including the size of the firm, types of services

provided, and number of locations;

2. At a minimum, provide for:

a. The protection, backup, and recovery of books and records;

b. Alternate means of communication with customers, key personnel,

employees, vendors, service providers, including third-party

custodians, and regulators, including but not limited to providing

notice of:

i. A significant business interruption;

ii. The death or unavailability of key personnel; and

iii. Other disruptions or cessations of business activities;

c. Office relocation in the event of temporary or permanent loss of a

principal place of business; and

d. Assignment of duties to qualified responsible persons in the event

of the death or unavailability of key personnel; and

3. Otherwise minimize service disruptions and client harm that could result

from a sudden significant business interruption.

(c) The investment adviser shall, at least annually, review the plan, and the

review shall be documented and maintained for three (3) years.

(6) (a) Every investment adviser that is registered or required to be registered shall

establish and implement written physical security and cybersecurity policies

and procedures designed to ensure the confidentiality, integrity, and

availability of physical and electronic records and information.

(b) The policies and procedures shall:

1. Be tailored to the investment adviser's business model, taking into

account the size of the firm, types of services provided, and the number

of locations;

2. At a minimum:

a. Protect against reasonably anticipated threats or hazards to the

security or integrity of client records and information;

b. Ensure that the investment adviser safeguards confidential client

records and information; and

c. Protect any records and information for which the release could

result in harm or inconvenience to any client; and

3. Cover at least the following five (5) functions:

a. Identification - development of organizational understanding to

manage information security risk to systems, assets, data, and

capabilities;

b. Protection - development and implementation of appropriate

safeguards to ensure delivery of critical infrastructure services;

c. Detection - development and implementation of appropriate

activities to identify the occurrence of an information security

event;

d. Response - development and implementation of appropriate

activities to take action regarding a detected information security

event; and

e. Recovery - development and implementation of appropriate

activities to maintain plans for resilience and to restore any

capabilities or services that were impaired due to an information

security event.

(c) 1. The investment adviser shall, at least annually, review the policies and

procedures to ensure the adequacy of the security measures and

effectiveness of their implementation.

2. The review shall be documented and previous versions of the policies

and procedures shall be maintained for three (3) years from the date of

development.

(7) The commissioner may by administrative regulation prohibit unreasonable charges,

profits, commissions, or other compensation of broker-dealers and investment

advisers.

(8) The commissioner may promulgate administrative regulations to prescribe rules for

the conduct of business by broker-dealers and investment advisers which he or she

finds appropriate in the public interest and for the protection of investors.

(9) The commissioner may enter into an arrangement, agreement, or other working

relationship with federal, other state, and self-regulatory authorities whereby

documents may be filed and maintained in a central depository system with the

Financial Industry Regulatory Authority (FINRA) or other agencies or authorities.