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AUDIT AND COMPLIANCE
The Audit & Compliance Division conducts on-site compliance examinations and for-cause
audits of branch and main offices of firms registered to offer investment advice
to Illinois consumers. The definitions of those firms subject to state regulation are
determined by the SEC and the National Securities Markets Improvement Act of
1996 (NSMIA). Compliance examinations are conducted to review the books and
records of the entity being examined, and are intended to assure compliance with the
Illinois Securities Law and attendant rules. For-cause audits are usually conducted to
assist in an enforcement inquiry. The Division currently has 17 auditors and
compliance examiners, and field assistance is also provided by other Department
personnel. The Division is in constant communication with, and routinely cooperates
with, the U.S. Securities & Exchange Commission, as well as other state and federal
regulatory agencies.
Salespersons holding themselves out separately as investment advisers or financial
planners remains a problem discovered during audits. In Illinois, anyone holding
themselves out to the public as offering these services may have to register as an
investment adviser. In order for a salesperson to rely on an exemption from the
definition from an investment adviser they must not provide investment advice to
more than 5 clients. All work product must also be approved by the dealer before it is
distributed to the customer or the salesperson is deemed to be acting separate and
apart from the dealer and the exclusion is not available. This is true regardless of
whether any direct fee is involved, because all salespersons receive indirect
compensation (commissions).
Due to recent changes in federal and state law, investment advisor representatives
who conduct business in this State and federal covered investment advisor
representatives with a place of business in Illinois must register with the Securities
Department and are subject to compliance examinations and audits. A place of
business of a federal covered investment adviser representative is defined as an
office at which the investment advisor representative regularly provides investment
advisory services, solicits, meets with, otherwise communications with clients, and
any other location that is held out to the general public as a location at which the
investment adviser representative provides investment advisory services, solicits,
meets with, or otherwise communications with clients. Another change in the federal
law requires audits of investment advisers with a principal place of business in
another state to be conducted based upon the books and records requirements of
the investment adviser's home state.
DISCLAIMER
The Secretary of State, Illinois Securities Department or their information providers shall not be liable
regardless of the cause or duration, for any errors, inaccuracies, omissions or untimeliness of the
information, or for any delay or interruption in the transmission thereof to the user, or for any claims or
losses arising therefrom.
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http://www.cyberdriveillinois.com/departments/securities/investment_advisers/advcomp.html 03/27/2006