It is unrealistic to believe that an unscrupulous salesperson will send copies of a Ponzi Scheme or evidence of other unscrupulous conduct to their home office, OSJ, or supervisor. Nor will they supply this information to some record depository established by the firm. Since there is no oversight of these locations, it is easy for the salesperson to conduct scams. The rule changes, as proposed, appear to allow firms and unscrupulous salespersons the opportunity to forego an on-site examination by stating that the required records are at the OSJ, main office, or record depository. This would greatly hinder the states ability to monitor these offices through an audit program.
Every salesperson maintains certain records in order to conduct business.
This Department concurs with this position, however, the current proposed rule does not reflect that requirement. The Department proposes the rule be amended to state minimum books and records requirements for all locations regardless of the number of salespersons. One of these offices was a one person off-site office, which under this rule change would probably not be recognized as an office. The SEC said that the firm should have reviewed the customer files located at these brokers' offices, which contained copies of the fraudulent statements sent to customers. For example, a mutual fund is a long term product and therefore should be held for a minimum of 3-5 years.