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An Audit Report on The Inspection Processes at the State Securities Board

August 2022

Summary Analysis

The State Securities Board (Agency) has an inspection process to ensure that Texas registered dealers and registered investment advisers (registrants) are in compliance with the Texas Securities Act and Texas Administrative Code requirements.

The Agency inspected the majority of its registrants every five years as required by the targeted timelines established in its policies. During its inspection process, the Agency identifies the registrants under its jurisdiction and selects registrants identified for inspection. However, it should document this process to ensure that (1) all registrants in the Agency’s jurisdiction are identified and (2) the Agency’s regions are consistent in their evaluation process.

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The State Securities Board (Agency) has an inspection process to ensure that Texas registered dealers and registered investment advisers (registrants) are in compliance with the Texas Securities Act and Texas Administrative Code requirements. For that process, Agency inspectors use electronic checklists that incorporate all related requirements to help determine whether the registrants are in compliance. The Agency and the North American Securities Administrators Association (NASAA) created the checklists to be used starting in February 2020.

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As of February 2022, the Agency had inspected 1,155 (96 percent) of its 1,201 registrants at least once within the last five years, as required by the targeted timelines established by its policies. During its inspection process, the Agency identifies the registrants under its jurisdiction and selects registrants identified for inspection. However, it should document this process to ensure that (1) all registrants in the Agency’s jurisdiction are identified and (2) the Agency’s regions are consistent in their evaluation process.

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The Agency generally had automated processes and related controls that help ensure the accuracy and completeness of its data. However, it should strengthen certain information technology controls.

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Graphics, Media, Supporting documents

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