Virginia Administrative Code › Title 21 - SECURITIES AND RETAIL FRANCHISING › Agency 5 - STATE CORPORATION COMMISSION › Chapter 20 - BROKER-DEALERS, BROKER-DEALER AGENTS AND AGENTS OF THE ISSUER › Part II - Broker-Dealer Agents › Section 21VAC5-20-135 - Continuing commission by retiring agents

Current through Register Vol. 40, No. 24, July 15, 2024
The payment of compensation to a registered agent after he
					 terminates his employment with a registered broker-dealer either by retirement,
					 disability, death, or payment to his surviving spouse or other beneficiaries,
					 will not be deemed to be a violation of commission regulations, provided the
					 broker-dealer enters into a bona fide contract with either the retiring agent
					 or the surviving spouse or beneficiaries, and the following conditions are
					 met.
1. The retiring agent must have
				  been continuously employed by or otherwise associated with the firm for a
				  minimum of three years, as of the date of his retirement.
2. The sharing of commissions will be limited
				  to commissions derived from accounts held for continuing customers of the
				  retiring agent regardless of whether customer funds or securities are added to
				  the accounts during the period after retirement.
3. The retiring agent must have demonstrated
				  that he conducted himself in a manner exhibiting appropriate professional
				  conduct. At a minimum, retirees must have been subject to no more than a low
				  incidence of investment-related customer complaints and arbitrations settled or
				  decided for more than $25,000 in the three years prior to the retirement
				  date.
4. If the retiring agent has
				  been subject to such complaints, the firm must have determined that the
				  complaints did not require disciplinary action or heightened supervision, and
				  that the retiree was not at fault for improper sales practices.
5. The retiring agent must not have been
				  subject to a statutory disqualification during the three years prior to
				  retirement.
6. The retiring agent
				  must comply, to the extent applicable, with federal and state securities
				  statutes and regulations, all policies, procedures, and rules of relevant
				  regulatory and self-regulatory bodies, and must certify compliance with the
				  policy at least annually.
7. The
				  broker-dealer must establish parameters for a reasonable time period, not to
				  exceed five years, following retirement and a percentage scale (that is either
				  fixed or decreases the percentage the retiring agent receives each year)
				  regarding the sharing of commissions by the retiring agent and the receiving
				  registered agent.
8. The retiring
				  agent must certify at least annually to the broker-dealer that he has adhered
				  to the requirements and conditions of the agreement.
9. The broker-dealer must contact a
				  representative sample of the account holders including a significant set of
				  high grossing customer accounts subject to the agreement at least annually to
				  confirm that the retiring agent has not provided investment advice or solicited
				  trades in securities in any way. For example, the broker-dealer may contact
				  annually:
(i) holders of the top 10 highest
				  grossing client accounts for that year and
(ii) holders of one-half of the next 25%
				  highest grossing client accounts.