Current through Register Vol. 56, No. 24, December 18, 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.
