Administrative Code

Virginia Administrative Code
11/28/2021

Part I. Broker-Dealers

21VAC5-20-10. Application for registration as a broker-dealer.

A. Application for registration as a broker-dealer by a FINRA member shall be filed in compliance with all requirements of CRD and in full compliance with forms and regulations prescribed by the commission and shall include all information required by such forms.

B. An application shall be deemed incomplete for registration as a broker-dealer by a FINRA member unless the applicant submits the following executed forms, fee, and information:

1. Form BD.

2. Statutory fee payable to FINRA in the amount of $200 pursuant to § 13.1-505 F of the Act.

3. Evidence of approved FINRA membership.

4. Evidence of at least one qualified agent registration pending on CRD.

5. Any other information the commission may require.

C. Application for registration for any non-FINRA member broker-dealer shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

D. An application shall be deemed incomplete for registration as a non-FINRA member broker-dealer unless the applicant submits the following executed forms, fee, and information to the commission:

1. Form BD.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $200 pursuant to § 13.1-505 F of the Act.

3. Financial statements required by 21VAC5-20-80.

4. Evidence of exam requirements for principals required by 21VAC5-20-70.

5. Evidence of at least one qualified individual with an agent registration pending with the division on behalf of the broker-dealer.

6. Any other information the commission may require.

E. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 200, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC890040, eff. July 1, 1989; Case No. SEC900034, eff. July 1, 1990; Virginia Register Volume 14, Issue 22, eff. July 1, 1998; Volume 15, Issue 22, eff. July 1, 1999; Volume 17, Issue 20, eff. July 1, 2001; Volume 29, Issue 20, eff. June 3, 2013.

21VAC5-20-20. Expiration.

A broker-dealer's registration, and any renewal thereof, shall expire annually at midnight on the 31st day of December, unless renewed in accordance with 21VAC5-20-30.

Statutory Authority

§ 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 201, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC840009, eff. October 5, 1984; Case No. SEC890040, eff. July 1, 1989.

21VAC5-20-30. Renewals.

A. To renew its registration, a FINRA member broker-dealer will be billed by CRD the statutory fee of $200 prior to the annual expiration date. A registration renewal shall be granted as a matter of course upon payment of the proper fee unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 or nonrenewal under § 13.1-505 E.

B. Any non-FINRA broker-dealer shall file with the commission at its Division of Securities and Retail Franchising the following items at least 30 days prior to the expiration of registration:

1. Application for Renewal of a Broker-Dealer's Registration (Form S.A.2) accompanied by the statutory fee of $200.

2. Financial Statements:

a. The most recent certified financial statements prepared by an independent accountant in accordance with generally accepted accounting principles, as promulgated by the American Institute of Certified Public Accountants. "Certified Financial Statements," "Financial Statements" and "Independent Accountant" shall have the same definition as those terms are defined under subsection B of 21VAC5-20-80.

b. If the most recent certified financial statements precede the date of renewal by more than 120 days, the registrant must submit the certified financial statements required by subdivision 2 a of this subsection within 60 days after the date of the financial statements.

c. Whenever the commission so requires, an interim financial report shall be filed as of the date and within the period specified in the commission's request.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 202, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC830011, eff. July 1, 1983; Case No. SEC840009, eff. October 5, 1984; Case No. SEC890040, eff. July 1, 1989; Virginia Register Volume 13, Issue 25, eff. September 1, 1997; Volume 17, Issue 20, eff. July 1, 2001; Volume 29, Issue 20, eff. June 3, 2013.

21VAC5-20-40. Updates and amendments.

A. A FINRA member broker-dealer shall update its Form BD as required by Form BD instructions and shall file all such amendments on and in compliance with all requirements of CRD and in full compliance with the regulations prescribed by the commission.

B. Any non-FINRA member broker-dealer shall update its Form BD as required by Form BD instructions and shall file all such amendments with the commission at its Division of Securities and Retail Franchising.

C. All broker-dealers must have at least one agent registered in Virginia as long as the firm maintains its registration.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 203, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC890040, eff. July 1, 1989; Virginia Register Volume 17, Issue 20, eff. July 1, 2001; Volume 29, Issue 20, eff. June 3, 2013.

21VAC5-20-50. Termination of registration.

A. When a FINRA member broker-dealer desires to terminate its registration, it shall file Form BDW in compliance with all requirements of CRD and in full compliance with the regulations prescribed by the commission.

B. Any non-FINRA member broker-dealer shall file a Form BDW with the commission at its Division of Securities and Retail Franchising.

Statutory Authority

§ 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 204, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC890040, eff. July 1, 1989; Volume 29, Issue 20, eff. June 3, 2013.

21VAC5-20-60. Broker-dealer merger or consolidation.

A. When there is a merger or consolidation of two or more registrants, or the reorganization of a registrant, the surviving or new entity shall amend or file, as the case may be, Form BD (the filing of Form BD requires the payment of a $200 fee) and shall file a copy of the following with the commission at its Division of Securities and Retail Franchising upon its request:

1. The certificate of merger or consolidation.

2. The plan of merger or consolidation.

3. The amended or new charter and by-laws.

4. Any document of explanation.

5. The current financial statements of the surviving or new entity and surety bond, if necessary.

B. Such amendment and/or filing shall be made immediately after the merger or consolidation becomes effective, except that the required financial statements shall be filed within 30 calendar days of the effective date of the merger or consolidation. The registration of the surviving or new entity usually will be granted by the commission on the same date that the merger or consolidation becomes effective. Each agent of the nonsurviving or new entity shall comply with 21VAC5-20-90 before registration as an agent with his new employer becomes effective. Every other agent of the defunct corporation shall comply with 21VAC5-20-90 or 21VAC5-20-130, whichever may be applicable.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 205, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC890040, eff. July 1, 1989; Case No. SEC910057, eff. July 1, 1991; Virginia Register Volume 17, Issue 20, eff. July 1, 2001; Volume 25, Issue 22, eff. July 1, 2009.

21VAC5-20-65. Broker-dealer records retention requirements.

The following requirements apply to every registered broker-dealer as a condition of registration as a broker-dealer under the Act:

1. All of the broker-dealer's records, promptly upon the request of the commission, will be made available for inspection by the commission and reproduction for the commission in an office where the records are maintained;

2. All of the broker-dealer's records or legible copies of the same, or printouts of the same, if automated, pertaining to a securities transaction any part of which occurred or is to occur within the Commonwealth of Virginia will be made available for inspection by the commission in the office of the commission's Division of Securities and Retail Franchising within five days after request of the commission for same;

3. The term "records" as used in this section means and includes all books, papers, documents, tapes, films, photographs, electronic readable format or other materials, regardless of physical form or characteristics that (i) are maintained for recordation or storage of information prepared, used or to be used in connection with a securities transaction or (ii) were used or are to be used in connection with securities transactions;

4. Failure to comply with this section may be considered grounds for the institution of a proceeding to revoke a broker-dealer's registration or for such other penalty prescribed by the Act; and

5. Any broker-dealer subject to a commission investigation may be required to pay the actual cost of the investigation.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 23, eff. July 1, 2007.

21VAC5-20-70. Examinations/qualifications.

A. Broker-dealers registered with the commission that are registered pursuant to § 15 of the Securities Exchange Act of 1934 (15 USC § 78o).

1. All principals of an applicant for registration as a broker-dealer must provide the commission with evidence of passing: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates within the two-year period immediately preceding the date of the application.

2. In lieu of meeting the examination requirement described in subdivision 1 of this subsection, at least two principals of an applicant may provide evidence of having passed the General Securities Principal Qualification Exam (Series 24) or at least two principals of an applicant may provide evidence of having passed the Qualification Examination for Principals appropriate to the category of registration as specified by the type of business conducted by the broker-dealer within the two-year period immediately preceding the date of the applications.

Any individual who has been registered in any state jurisdiction as a principal within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirements of this section.

For the purposes of this subsection, the term "principal" means any person associated with a broker-dealer who is engaged directly (i) in the management, direction or supervision on a regular or continuous basis on behalf of such broker-dealer of the following activities: sales, training, research, investment advice, underwriting, private placements, advertising, public relations, trading, maintenance of books or records, financial operations; or (ii) in the training of persons associated with such broker-dealer for the management, direction, or supervision on a regular or continuous basis of any such activities.

3. This subsection is applicable only to principals of broker-dealers that are, or intend to forthwith become, registered pursuant to § 15 of the federal Securities Exchange Act of 1934.

B. Broker-dealers registered with the commission that are not registered pursuant to § 15 of the federal Securities Exchange Act of 1934.

1. All principals of an applicant for registration as a broker-dealer must provide the commission with evidence of passing:

a. The Uniform Securities Agent State Law Examination, Series 63; the Uniform Combined State Law Examination, Series 66; or a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates within the two-year period immediately preceding the date of the application;

b. Any additional securities-related examination that the commission deems appropriate in light of the business in which the applicant proposes to engage; and

c. Any individual who has been registered in any state jurisdiction as a principal within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirements of this section.

2. This subsection is applicable only to principals of broker-dealers that are not, or do not intend to forthwith become, registered pursuant to § 15 of the federal Securities Exchange Act of 1934.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 206, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC820019, eff. July 1, 1983; Case No. SEC830011, eff. July 2, 1984; Case No. SEC890040, eff. July 1, 1989; Virginia Register Volume 11, Issue 21, eff. July 1, 1995; Volume 13, Issue 25, eff. September 1, 1997; Volume 14, Issue 22, eff. July 1, 1998; Volume 15, Issue 22, eff. July 1, 1999; Volume 17, Issue 20, eff. July 1, 2001; Volume 19, Issue 23, eff. July 1, 2003; Volume 25, Issue 22, eff. July 1, 2009.

21VAC5-20-80. Financial statements and reports.

A. All financial statements required for registration of broker-dealers shall be prepared in accordance with generally accepted accounting principles, as promulgated by the American Institute of Certified Public Accountants.

B. Definitions:

"Certified financial statements" means those financial statements examined and reported upon with an opinion expressed by an independent accountant and shall include at least the following information:

1. Date of report, manual signature, city and state where issued, and identification without detailed enumeration of the financial statements and schedules covered by the report;

2. Representations as to whether the audit was made in accordance with generally accepted auditing standards and designation of any auditing procedures deemed necessary by the accountant under the circumstances of the particular case which may have been omitted, and the reason for their omission; nothing in this section however shall be construed to imply authority for the omission of any procedure which independent accountants would ordinarily employ in the course of an audit for the purpose of expressing the opinions required under this section;

3. Statement of the opinion of the accountant in respect to the financial statements and schedules covered by the report and the accounting principles and practices reflected therein, and as the consistency of the application of the accounting principles, or as to any changes in such principles which would have a material effect on the financial statements;

4. Any matters to which the accountant takes exception shall be clearly identified, the exemption thereto specifically and clearly stated, and, to the extent practicable, the effect of each such exception on the related financial statements given.

"Financial statements" means those reports, schedules and statements, prepared in accordance with generally accepted accounting principles and which contain at least the following information unless the context otherwise dictates:

1. Statement of Financial Condition or Balance Sheet;

2. Statement of Income;

3. Statement of Cash Flows;

4. Statement of Changes in Stockholder's/Partner's/Proprietor's/Member's Equity;

5. Statement of Changes in Liabilities Subordinated to Claims of General Creditors;

6. Schedule of the Computation of Net Capital Under Rule 15c3-1 of the Securities Exchange Act of 1934 (17 CFR 240.15c3-1);

7. Schedule of the Computation for Determination of the Reserve Requirements under Exhibit A of Rule 15c3-3 and Information Relating to the Possession and Control Requirements under Rule 15c3-3 of the Securities Exchange Act of 1934 (17 CFR 240.15c3-3).

"Independent accountant" means any certified public accountant in good standing and entitled to practice as such under the laws of the accountant's principal place of business or residence, and who is, in fact, not controlled by, or under common control with, the entity or person being audited.

1. For purposes of this definition, an accountant will be considered not independent with respect to any person or any of its parents, its subsidiaries, or other affiliates in which, during the period of the accountant's professional engagements to examine the financial statements being reported on the date of the report, the accountant or the firm or a member thereof had, or was committed to acquire, any direct financial interest or any material indirect financial interest; or in which, during the period of the accountant's professional engagements to examine the financial statements being reported on, at the date of the report or during the period covered by the financial statements, the accountant or the firm or a member thereof was connected as a promoter, underwriter, voting trustee, director, officer, or employee.

2. A firm will not be deemed not independent in regard to a particular person if a former officer or employee of such person is employed by the firm and such individual has completely disassociated himself from the person and its affiliates covering any period of employment by the person.

3. For partners in the firm participating in the audit or located in an office of the firm participating in a significant portion of the audit; and in determining whether an accountant may in fact be not independent with respect to a particular person, the commission will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the accountant and that person or any affiliate thereof, and will not confine itself to the relationships existing in connection with the filing of reports with the commission.

"Review of financial statements" means those financial statements reviewed by an independent accountant, and shall include at least the following:

1. Date of report, manual signature, city and state where issued, and identification without detailed enumeration of the financial statements and schedules covered by the report;

2. Representations that the review was performed in accordance with standards established by the American Institute of Certified Public Accountants;

3. Representations that the accountant is not aware of any material modification that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles, other than those modifications, if any, indicated in the accountant's report.

"Unaudited financial statements" means those financial statements prepared in a format acceptable to the commission not accompanied by the statements and representations as set forth in the definitions of "certified financial statements" or "review of financial statements" of this subsection, and shall include an oath or affirmation that such statement or report is true and correct to the best knowledge, information, and belief of the person making such oath or affirmation. The oath or affirmation shall be made before a person authorized to administer the oath or affirmation, and shall be made by an officer of the entity for whom the financial statements were prepared.

C. Requirements for broker-dealers:

1. Every broker-dealer applicant subject to the Securities Exchange Act of 1934 shall file with the commission at its Division of Securities and Retail Franchising upon its request any financial information required to be provided to the SEC, or its designee, under the Securities Exchange Act of 1934.

2. All other broker-dealer applicants not subject to subdivision 1 of this subsection, unless exempted under subdivision 3 of this subsection, shall file financial statements as of a date within 90 days prior to the date of filing its application for registration. The statements need not be audited provided that the applicant shall also file audited financial statements as of the end of the most recent fiscal year end.

3. Those broker-dealer applicants in operation for a period of time less than 12 months, and for which audited financial statements have not been prepared or are not available, and are not registered with the SEC, a national securities association or a national securities exchange, shall be permitted to file financial statements reviewed by an independent accountant provided the following conditions are met:

a. The financial statements shall be as of a date within 30 days prior to the date of filing an application for registration; and

b. The financial statements shall be reviewed by an independent accountant as defined under subsection B of this section and in accordance with the definitions of "financial statements" and "review of financial statements" in subsection B and in accordance with subdivision 3 of this subsection.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 207, Case No. SEC810005, eff. July 1, 1981; amended by Case No. SEC840009, eff. October, 5, 1984; Case No. SEC890040, eff. July 1, 1989; Virginia Register Volume 13, Issue 25, eff. September 1, 1997; Volume 14, Issue 22, eff. July 1, 1998; Volume 17, Issue 20, eff. July 1, 2001; Volume 29, Issue 20, eff. June 3, 2013.

21VAC5-20-85. Limited Canadian broker-dealer registration.

A. A broker-dealer that is resident in Canada and has no office or other physical presence in the Commonwealth of Virginia may, provided the broker-dealer is registered under this section, effect transactions in securities:

1. With or for a person from Canada who is temporarily residing in or visiting the Commonwealth with whom the Canadian broker-dealer had a bona fide business-client relationship before the person entered this Commonwealth; or

2. With or for a person present in this Commonwealth whose transactions are in a Canadian self-directed tax advantaged retirement account of which the person is the holder or contributor.

B. Application for registration as a broker-dealer under this section shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

C. An application for registration as a broker-dealer under this section shall be deemed incomplete for purposes of applying for registration unless the following executed forms, fee, and information are submitted to the commission:

1. An application in the form required by the jurisdiction in which the broker-dealer maintains its principal place of business.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $200 United States currency pursuant to § 13.1-505 F of the Act.

3. Evidence that the applicant is registered as a broker-dealer in the jurisdiction from which it is effecting the transactions.

4. Evidence that the applicant is a member of a self-regulatory organization or stock exchange in Canada.

5. Any other information the commission may require.

D. A broker-dealer registered under this section shall:

1. Maintain its provincial or territorial registration and its membership in a self-regulatory organization or stock exchange in good standing;

2. Provide the commission upon request with its books and records relating to its business in the Commonwealth of Virginia as a broker-dealer;

3. Immediately notify the commission of any criminal action taken against it or of any finding or sanction imposed on the broker-dealer as a result of any self-regulatory or regulatory action involving fraud, theft, deceit, misrepresentation, or similar conduct;

4. Disclose to its clients in the Commonwealth of Virginia that the broker-dealer and its agents are not subject to the full regulatory requirements of the Act.

E. A broker-dealer's registration under this section, and any renewal thereof, shall expire annually at midnight on the 31st day of December unless renewed in accordance with subsection F of this section.

F. To renew its registration, a broker-dealer registered under this section shall file with the commission at its division the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer maintains its principle place of business, or if no such renewal application is required, the most recent application filed pursuant to subdivision C 1 of this section along with the statutory fee in the amount of $200 United States currency pursuant to § 13.1-505 F of the Act.

G. A Canadian broker-dealer registered under this section and acting in accordance with the limitations set out in this section is exempt from all other rules applicable to broker-dealers except the anti-fraud provisions of the Act and the requirements set out in this section.

Statutory Authority

§§ 12.1-13 and 13.1-523.1 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 20, eff. July 1, 2001; amended, Virginia Register Volume 19, Issue 23, eff. July 1, 2003; Volume 31, Issue 25, eff. July 31, 2015.

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