An examination of a dealer or adviser’s books, records and operations is to ensure the dealer and its agents or investment adviser and its representatives are in compliance with the Alabama Securities Act and the Commission Rules of the Alabama Securities Commission.
Most routine examinations are conducted with a two day notification and for cause examinations are conducted on an unannounced basis.
Examinations are conducted during the regular business hours of a registered broker dealer or investment adviser.
All offices of a broker dealer or investment adviser are subject to on-site examinations or audits, including branch offices.
The audit generally consists of a review of the books and records that pertain to your advisory business, and a broker-dealer audit consists of a review of certain books and records associated with that activity as well. Additionally, the audit will include an interview of your principal and perhaps interviews of selected other personnel at your firm. Also, if required records are commingled with other records the examiners may review all commingled records.
The on-site portion of the audit will typically take one and a half to two business days but may run longer for a broker-dealer or if there are unforeseen complexities or logistical constraints placed on the audit staff.
Typically there will be two (2) audit staff members on site (one lead examiner and one associate). However, if there are unforeseen complexities or logistical constraints placed on the audit staff there could be more or less than two (2) auditors but this should not be interpreted as necessarily indicative of any wrongdoing.
The lead examiner is the staff member primarily responsible for the engagement and should be the first person to contact if you have a question, need clarification on an audit related issue, or simply inquiring as to the status of the audit. The associate examiner can be contacted if the primary examiner is unavailable.
Yes, an electronic version is an acceptable method of production. However, all required books and records either maintained in hardcopy or electronically, must be immediately accessible to the examination staff.
There are several methods of cross checking the identity of the examiners. You can call the ASC on the direct line at (334) 242-2984 or toll free at (800) 222-1253 and confirm identities with the Audit Division Manager. You can also go to the agency directory and look for the examiners by name. Finally, you can ask for ASC issued identification which consists of business card and photo badge. You may make a copy of either for your records.
You will be given an opportunity to respond when the post audit letter is issued.
Yes, but the presence of an attorney is typically not necessary and may involve significant costs to your firm in billable hours.
Yes, but the audit staff will be primarily concerned with how well you understand the compliance rules and regulations that pertain to your firm, not your consultant’s expertise. To that end, during the engagement continually deferring to the consultant for the answers to the examiner’s queries would not be conducive to the Commission’s goal of ascertaining your understanding of what is required.
The Audit Division Manager at (334) 242-2984 would handle any complaints you may have with an ASC staff member.
The Commission staff is not authorized to offer recommendations of this nature since any recommendation made could be an implied endorsement of a given entity which is not permissible.
Routine audits of state registered investment advisers are typically conducted on a 2-3 year cycle. Firms maintaining custody are placed on an annual audit cycle, while for cause audits are conducted as often as necessary.
Yes, assuming they are compensated, a person who only solicits investment advisory clients for another registered investment adviser must be registered as an investment adviser representative of a registered investment advisory firm.
Yes, on the same cycle as a traditional investment adviser.
An Investment Advisory audit conducted by the ASC is an examination of the adviser’s books, records and operations to ensure they comply with the Alabama Securities Act, ASC rules and other laws applicable to investment advisers. An independent CPA audit is an audit of the financial statements of the adviser. A surprise audit mandated by ASC rules is an independent audit conducted by a CPA to ensure that client assets over which the adviser has custody do exist, have not been misappropriated, and reconcile to those assets reported to the client.