Missouri Code of State Regulations › Title 15 - ELECTED OFFICIALS › Division 30 - Secretary of State › Chapter 51 - Broker-Dealers, Agents, Investment Advisers, and Investment Adviser Representatives › Section 15 CSR 30-51.173 - Supervision Guidelines for Investment Advisers

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This rule provides guidance for reasonable
				  supervision by investment advisers.
(1) The following are factors considered by
				the commissioner to determine whether any firm with two (2) or more supervised
				persons has engaged in reasonable supervision. Whether-
(A) The firm has established current
				procedures and systems for supervising the activities of supervised persons
				that are reasonably designed to achieve compliance with applicable state and
				federal securities laws and regulations;
(B) The firm has established current
				procedures and systems that could reasonably be expected to allow a chief
				compliance officer reasonably discharging his/her supervisory duties under such
				established procedures to prevent and detect violations of the Act, and the
				firm regularly reviews these procedures and systems;
(C) The firm has reasonably implemented the
				procedures and systems referred to in subsections (A) and (B) above;
(D) The firm provides appropriate initial and
				periodic refresher training to supervised persons regarding the firm's
				procedures and systems and additional initial and periodic training to chief
				compliance officers in the procedures and systems referred to in subsections
				(A) and (B) above;
(E) The firm
				reasonably follows up on indications of wrongdoing, "red flags." Such red flags
				may consist of, but are not limited to, activities of unregistered individuals,
				outside business activities, making unsuitable recommendations, charging
				unreasonable advisory fees, misrepresenting the qualifications of the
				supervised person, improper use of a senior designation, garnishment of wages,
				regulatory actions, prior disciplinary history of one (1) or more customer
				complaints, and recent customer complaints;
(F) The firm has an adequate system to track
				and monitor the status of customer complaints;
(G) The firm has designated a chief
				compliance officer of the investment adviser;
(H) The designated supervisor is responsible
				for supervising no more supervised persons at any one (1) time than would allow
				the supervisor to effectively execute his supervisory duties. The appropriate
				number of supervised persons which one (1) person can reasonably supervise is
				dependent on the nature of the business conducted by the persons supervised,
				technical resources available to the supervisor, additional personnel available
				to assist the supervisor, and other resources made available to assist the
				supervisor;
(I) The firm conducts
				annual compliance examinations of supervisory locations with effective
				deficiency and follow-up procedures. Unannounced examinations may be reasonable
				if there are compliance issues concerning supervised persons or
				activities;
(J) The firm reasonably
				audits for compliance including reasonable follow-up and proof, independent of
				the supervised person, that mail is reviewed for customer complaints and other
				red flags; and
(K) The firm has a
				reasonable policy for disciplinary and progressive supervisory action, which is
				reasonably implemented.