Current through Register Vol. 56, No. 18, September 16, 2024
(a) Duty of reasonable supervision. Every investment adviser registered by
the Bureau shall reasonably supervise employees who give investment advice with a view toward preventing
violations of the New Jersey Uniform Securities Law, and other Federal and/or state securities laws. Final
responsibility for proper supervision shall rest with the investment adviser. In determining whether an
investment adviser registered by the Bureau has reasonably supervised, the following factors will be taken
into consideration:
1. The investment adviser has established written
policies and procedures and a system for applying the policies and procedures, with consideration for the
size and number of locations of the investment adviser, that would reasonably be expected to prevent and
detect, insofar as practicable, any violation by its investment adviser representatives or other persons,
employed by or associated with, the investment adviser;
2. The
investment adviser has reasonably discharged the duties and obligations incumbent on the investment adviser
by reason of the established written policies and procedures and the system for applying the policies and
procedures without reasonable cause to believe that there was not compliance with the policies and procedures
and systems; and
3. Any additional information, as needed by the
Bureau, to make a determination.
(b) This supervisory
system, including written supervisory policies and procedures, shall provide, at a minimum, to the extent
relevant, for the following:
1. Portfolio management processes, including
allocation of investment opportunities among clients and consistency of portfolios with clients' investment
objectives, disclosures by the investment adviser, and applicable regulatory restrictions;
2. Trading practices, including policies and procedures by which the
investment adviser satisfies its best execution obligation, uses client brokerage to obtain research and
other services (soft dollar arrangements), and allocates aggregated trades among clients;
3. Proprietary trading of the investment adviser and personal trading
activities of supervised persons;
4. The accuracy of disclosures
made to investors, clients, and regulators, including account statements and advertisements;
5. Safeguarding of client assets from conversion or inappropriate use by
advisory personnel;
6. The accurate creation of required records
and their maintenance in a manner that secures them from unauthorized alteration or use and protects them
from untimely destruction;
7. Marketing advisory services,
including the use of solicitors;
8. Processes to value client
holdings and assess fees based on those valuations;
9. Safeguards
for the privacy protection of client records and information; and
10. Business continuity plans, which generally provide for, but are not
limited to, the following:
i. The protection, back-up, and recovery of
books and records;
ii. Establishing alternate means of
communication with customers, employees, and regulators;
iii.
Office relocation, in the event of a loss of principal place of business; and
iv. A designation of duties to responsible person(s) in the event of the
death or disability of a key individual, principal, owner, or other such personnel.
(c) Annual review. Every investment adviser registered by the
Bureau shall review, no less frequently than annually, the adequacy of the policies and procedures
established pursuant to this section and the effectiveness of their implementation.
(d) Chief Compliance Officer. Every investment adviser registered by the
Bureau shall designate an individual (who is a supervised person) responsible for administering the policies
and procedures that are adopted pursuant to (a) above. The designated individual shall have successfully
passed the Uniform Investment Adviser Law Examination (Series 65 Examination), or its successor
exam.
