Announcing the 2010 Coordinated Broker-Dealer Examinations

January – June 2010

The North American Securities Administrators Association (“NASAA”) conducted a coordinated examination of registered broker-dealers between May 1, 2006 and June 30, 2006. The purpose of the project was to identify common deficiencies identified during the broker-dealer examinations and to present the findings at the Fall Conference. Twenty-eight NASAA jurisdictions including the District of Columbia and the U.S. Virgin Islands conducted 215 examinations of broker-dealers during this period. The findings of that effort and the subsequent published report were extremely well received by both the regulatory and the investment communities. In addition to publication by NASAA, the report was featured in several industry publications. A chart from the 2006 report is shown below. The full report and accompanying PowerPoint presentation can be found on the NASAA website.

The benefits of conducting such a project touch several areas including industry, consumer, and regulatory outreach opportunities, examiner training, and examination targeting.

In an effort to build upon and provide follow-up to the successful coordinated examination projects, the NASAA Broker-Dealer Operations Project Group will again organize a coordinated broker-dealer examination project during the months of January through June of 2010. The goal is to have the results and report presented at the 2010 NASAA Annual Fall Conference in September 2010. We ask all states to report broker-dealer exams which were opened or closed during the six months of January through June of 2010. While we realize we are already in the midst of the six month period we are simply asking you to report the findings of any examinations your state worked on during the specified timeframe.

The main difference between the past and current report form will be the addition of Box 1 which should be used to indicate whether the item was part of the examination scope, while Box 2 will be utilized to indicate whether a deficiency/violation was present on that item. This is being done so that we may obtain the percentage of each type of violation/deficiency that is present within the examination scope instead of calculating the percentage within the total number of examinations completed. As an example, of the 300 examinations reported, if only five examinations indicate anti-money laundering (AML) within the scope of the examination, and of those only two had violations/deficiencies present, the percentage of examinations which had AML violations/deficiencies were 2 of 5 or 40% as opposed to 2 of 300 or .6%.

To make the reporting and collating of the resulting data faster and more efficient, an exam report form has been created specifically for this project which includes a “checklist” of all categories and deficiencies identified by the Project Group as common violations. Space is also provided for violations/deficiencies not listed on the form. The form is included as an attachment to this letter. It will also be sent separately to each jurisdiction in electronic format with instructions. An examiner would conduct an exam as usual for his or her jurisdiction, complete the exam form, and then send the exam form to the designated individual responsible for collecting data from that jurisdiction via mail, fax, or e-mail (preferred). In order to allow for the review and compilation of the examination findings we would request that reports be forwarded to Carol Gruis no later than August 15, 2010.

Should any questions arise during this project please contact any of the following members of the BD Operations Project Group:

Bill Reilly - Florida (850) 410-9783

Carol Gruis - Oklahoma (405) 280-7730

Klem Klementon - Connecticut (860) 240-8230

Bennette Zivley - Texas (512) 305-8394

Jim Nix - Illinois (312) 793-9620

Peter Cole - New Jersey (973) 504-3600

The Broker-Dealer Section and the Broker-Dealer Operations Project Group wish to thank you for your involvement in the coordinated exam projects in 2006 and asks for your assistance and participation again during the 2010 project.

Sincerely,

William F. Reilly, Jr., Chair

Broker Dealer Operations Project Group

(850) 410-9783

Click this link to download the 2010 EXAM REPORT FORM

Send completed report forms via e-mail (preferred), fax, or regular mail to:

Carol Gruis

Oklahoma Securities Commission

120 N. Robinson – Suite 860

Oklahoma City, OK 73102

Phone (601) 280-7730

Fax (405) 280-7742

Email: